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Revenue increased 16 percent to $1.07 billionFeb 5, 2016
SAN DIEGO, CA, February 5, 2015 – / PRNewswire / -- CareFusion Corp. (NYSE: CFN), a leading, global medical technology company, today reported financial results for its fiscal second quarter, growing revenue in every business line and major geography and increasing adjusted EPS by 83 percent from the prior year period.
"Our team remained disciplined in their execution and saw the benefit from investments we've made during the past four years, with record quarterly results across the company," said Kieran T. Gallahue, chairman and CEO. "In what will likely be the last reported quarter before our merger with BD, we have good momentum in all businesses, our customers see clear value in what we offer today and we have an even stronger vision for the future as part of BD.
"Results in the Medical Systems segment were again highlighted by the strength of our medication management offering, anchored by another quarter of strong committed contracts for our industry leading Pyxis® dispensing technologies and Alaris® infusion systems. In the Procedural Solutions segment, we continued to grow faster than the market due to the strength of our clinically differentiated products and the impact of our Vital Signs acquisition. Outside the U.S. – where we have been actively refining our offerings and go-to-market models -- we recorded double-digit revenue growth in Europe, Asia, Canada and Latin America.
"I want to thank CareFusion employees around the world for the results they deliver every day for customers and patients. We have built a unique company, and I know I speak for our entire leadership team when I say how proud we have been to work alongside such a dedicated group of individuals."
On Oct. 5, 2014, CareFusion and BD announced a definitive agreement under which BD will acquire CareFusion in a cash and stock offer valued at more than $12 billion. The transaction is expected to close by March 31.
Second Quarter Results
For the quarter ended Dec. 31, 2014, consolidated revenue grew 16 percent to $1.07 billion compared to $922 million in the second quarter of fiscal year 2014, an 18 percent increase in constant currency. Growth in every business line and the impact of the Vital Signs acquisition contributed to strong revenue during the quarter.
Gross profit increased 15 percent from the prior year period to $535 million, with gross margins declining 50 basis points to 50 percent primarily due to expected changes in product mix associated with the acquisition of Vital Signs and installation costs for capital equipment. These pressures offset gross margin improvements from the Infusion Systems business line.
Operating income was $178 million, up 17 percent from $152 million in the prior year period. Excluding nonrecurring items, adjusted operating income grew 27 percent to $229 million.
Operating expenses totaled $360 million. Excluding nonrecurring items, adjusted operating expenses were $309 million, an increase of 7 percent over the prior year period, primarily driven by acquired selling, general and administrative costs from the Vital Signs acquisition and an increase in the accrual for incentive compensation.
The company reported net income of $173 million, or $0.83 per diluted share. Adjusted net income increased 78 percent from the prior year period to $206 million, or $0.99 per diluted share. As previously disclosed, CareFusion settled a tax audit with the Internal Revenue Service during the second quarter that had a positive impact on adjusted EPS for the quarter.
Second quarter revenue for the Medical Systems segment was $645 million, a 10 percent increase from the prior year period on a reported basis, led by strong growth in all three business lines. The quarter was highlighted by growth in the Dispensing Technologies and Infusion Systems business lines where the CareFusion medication management offering continues to gain momentum with U.S. hospitals. In addition, the segment grew capital equipment sales in all major sales regions outside the U.S.
Segment profit for the quarter increased 15 percent to $125 million from $109 million in the prior year period. Adjusted segment profit increased 16 percent to $144 million.
Second quarter revenue for the Procedural Solutions segment was $424 million, a 27 percent increase from the prior year period on a reported basis, driven by growth in all three business lines and the addition of the Vital Signs products to CareFusion's Specialty Disposables portfolio. Excluding the impact of acquisitions and planned discontinuation of certain contract manufacturing revenue, segment revenue increased 8 percent during the quarter led by growth of the company's clinically differentiated products.
Segment profit increased 23 percent to $53 million from $43 million in the prior year period. On an adjusted basis, second quarter segment profit grew 49 percent to $85 million.
For the first six months of fiscal 2015, revenue increased 14 percent to $1.99 billion compared to $1.75 billion in the first half of fiscal 2014. Operating income totaled $304 million and income from continuing operations was $249 million, or $1.20 per diluted share. Adjusted operating income grew 22 percent to $395 million compared to $323 million in the first half of the prior year, with adjusted EPS growing 53 percent to $1.50 per diluted share.
Operating expenses in the first six months totaled $693 million, or $604 million on an adjusted basis.
Segment results for the six months ended Dec. 31, 2014 and 2013 are as follows:
|Medical Systems||1H||1H FY14||Y/Y|
|Revenue||$1,173 million||$1,111 million||6%|
|Segment Profit||$209 million||$183 million||14%|
|Adjusted Segment Profit||$242 million||$214 million||13%|
|Procedural Solutions||1H FY15||1H FY14||Y/Y|
|Segment Profit||$95 million||$85 million||12%|
|Adjusted Segment Profit||$153 million||$109 million||40%|
Additional second quarter and recent highlights include:
Conference Call and Outlook
Given the announcement that CareFusion and BD have entered into a definitive merger agreement, CareFusion will no longer hold conference calls for quarterly earnings or update its financial guidance.
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 and IV sets, MaxPlus® and MaxZero™ IV connectors and sets, Pyxis® automated dispensing and patient identification systems, AVEA®, LTV® series and AirLife® 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 16,000 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" and "adjusted operating expenses," which exclude amortization of acquired intangibles, as well as nonrecurring restructuring and acquisition integration charges; "adjusted operating income" and "adjusted operating margin," which exclude amortization of acquired intangibles, nonrecurring restructuring and acquisition integration charges, and inventory valuation step-up charges from acquisitions; and "adjusted net income," "adjusted diluted earnings per share" and "adjusted effective tax rate," which exclude the amortization of acquired intangibles, nonrecurring restructuring and acquisition integration charges, inventory valuation step-up charges from acquisitions 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, net income, diluted earnings per share and effective tax rate. The company has included below unaudited adjusted financial information for the quarters ended Dec. 31, 2014 and 2013, 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
This news release and information contained within include certain estimates and other forward-looking statements (as defined under Federal securities laws). Forward looking statements generally are accompanied by words such as "will", "expect", "outlook" or other similar words, phrases or expressions. These forward-looking statements include statements regarding the anticipated benefits of the proposed combination with BD, the expected timing of completion of the transaction with BD, and other statements that are not historical facts. Statements regarding the proposed transaction with BD are based on the current expectations and are not predictions of actual performance. These statements are subject to a number of risks and uncertainties regarding BD and CareFusion's respective businesses and the proposed acquisition, and actual results may differ materially. These risks and uncertainties include, but are not limited to, the ability of the parties to successfully close the proposed acquisition, including the risk that the required regulatory approvals are not obtained, are delayed or are subject to unanticipated conditions that could adversely affect the combined company or the expected benefits of the transaction; risks relating to the integration of CareFusion's operations, products and employees into BD and the possibility that the anticipated synergies and other benefits of the proposed acquisition will not be realized or will not be realized within the expected timeframe; the outcome of any legal proceedings related to the proposed merger; access to available financing for the refinancing of BD's or CareFusion's debt on a timely basis and reasonable terms; the ability to market and sell CareFusion's products in new markets, including the ability to obtain necessary regulatory product registrations and clearances; the loss of key senior management or other associates; the anticipated demand for BD's and CareFusion's products, including the risk of future reductions in government healthcare funding, changes in reimbursement rates or changes in healthcare practices that could result in lower utilization rates or pricing pressures; the impact of competition in the medical device industry; the risks of fluctuations in interest or foreign currency exchange rates; product liability claims; difficulties inherent in product development, including the timing or outcome of product development efforts, the ability to obtain regulatory approvals and clearances and the timing and market success of product launches; risks relating to fluctuations in the cost and availability of raw materials and other sourced products and the ability to maintain favorable supplier arrangements and relationships; successful compliance with governmental regulations applicable to BD, CareFusion and the combined company; changes in regional, national or foreign economic conditions; uncertainties of litigation, as well as other factors discussed in BD's and CareFusion's respective filings with the Securities Exchange Commission. In addition, other statements that are not historical facts are subject to additional risks and uncertainties, the most significant of which 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. The CareFusion news release and the information contained herein reflect management's views as of February 5, 2015. 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)
|in millions, except per share amount||2014||2013||2014||2013|
|Revenue||$ 1,069||$ 922||$ 1,991||1,752|
|Cost of Products Sold||534||456||999||863|
|Selling, General and Administrative Expenses||279||257||544||505|
|Research and Development Expenses||49||47||98||95|
|Restructuring and Acquisition Integration Charges||32||10||51||21|
|Share of Net (Earnings) Loss of Equity Method Investee||( 3 )||-||( 5 )||-|
|Interest Expense and Other, Net||26||21||54||41|
|Income Before Income Tax||152||131||250||227|
|Provision (Benefit) for Income Tax||( 21 )||34||1||52|
|Net Income||$ 173||$ 97||$ 249||$ 175|
|Per Share Amounts:1|
|Basic Earnings per Common Share:|
|Basic Earnings per Common Share:||$ 0.85||$ 0.46||$ 1.22||$ 0.83|
|Diluted Earnings per Common Share:|
|Diluted Earnings per Common Share:||$ 0.83||$ 0.45||$ 1.20||$ 0.81|
|Weighted-Average Number of Common Shares Outstanding:|
|Adjusted Financial Measures:2|
|Gross Profit||$ 535||$ 469||$ 994||$ 892|
|Gross Margin3||50.0 %||50.9 %||49.9 %||50.9 %|
|Operating Margin3||21.4 %||19.6 %||19.8 %||18.4 %|
|Diluted EPS1||$ 0.99||$ 0.54||$ 1.50||$ 0.98|
|Effective Tax Rate||-1.8 %||27.3 %||9.1 %||24.8 %|
CAREFUSION CORPORATION SEGMENT AND SELECT BUSINESS LINE REVENUES(UNAUDITED)
|( in millions )||2014||2013||Percent Change||2014||2013||Percent Change|
|Dispensing Technologies||$ 264||$ 236||12 %||$ 489||$ 447||9 %|
|Infusion Systems||269||247||9 %||482||466||3 %|
|Respiratory Technologies||106||96||10 %||191||184||4 %|
|Other||6||8||( 25 ) %||11||14||( 21 ) %|
|Total Medical Systems||$ 645||$ 587||10 %||$ 1,173||$ 1,111||6 %|
|Infection Prevention||$ 180||$ 168||7 %||$ 347||$ 317||9 %|
|Medical Specialties||96||89||8 %||187||178||5 %|
|Specialty Disposables||148||78||90 %||284||146||95 %|
|Total Procedural Solutions||$ 424||$ 335||27 %||$ 818||$ 641||28 %|
|Total CareFusion||$ 1,069||$ 922||16 %||$ 1,991||$ 1,752||14 %|
CAREFUSION CORPORATION RECONCILIATION OF NON-GAAP FINANCIAL MEASURES (UNAUDITED)
Adjusted Financial Data:
|( in millions, except per share amounts )||Medical Systems||Procedural Solutions||Gross Profit||SG & A Expenses||Operating Expenses4||Operating Income5||Net Income6||Diluted EPS7|
|Quarter Ended December 31, 2014|
|GAAP||$ 125||$ 53||$ 535||$ 279||$ 360||$ 178||$ 173||$ 0.83|
|Restructuring and Acquisition Integration1||11||21||-||-||( 32 )||32||21||0.10|
|Amortization of Acquired Intangibles2||8||11||-||( 19 )||( 19 )||19||12||0.06|
|Adjusted||$ 144||$ 85||$ 535||$ 260||$ 309||$ 229||$ 206||$ 0.99|
|Six Months Ended December 31, 2014|
|GAAP||$ 209||$ 95||$ 992||$ 544||$ 693||$ 304||$ 249||$ 1.20|
|Restructuring and Acquisition Integration1||18||33||-||-||( 51 )||51||36||0.17|
|Amortization of Acquired Intangibles2||15||23||-||( 38 )||( 38 )||38||24||0.12|
|Step-up of Acquired Inventory3||-||2||2||-||-||2||1||0.01|
|Adjusted||$ 242||$ 153||$ 994||$ 506||$ 604||$ 395||$ 310||$ 1.50|
|Quarter Ended December 31, 2013|
|GAAP||$ 109||$ 43||$ 466||$ 257||$ 314||$ 152||$ 97||$ 0.45|
|Restructuring and Acquisition Integration1||6||4||-||-||( 10 )||10||7||0.03|
|Amortization of Acquired Intangibles2||$ 9||$ 7||$ -||$ ( 16 )||$ ( 16 )||16||$ 10||$ 0.05|
|Step-up of Acquired Inventory3||-||3||3||-||-||3||2||0.01|
|Adjusted||$ 124||$ 57||$ 469||$ 241||$ 288||$ 181||$ 116||$ 0.54|
|Six Months Ended December 31, 2013|
|GAAP||$ 183||$ 85||$ 889||$ 505||$ 621||$ 268||$ 175||$ 0.81|
|Restructuring and Acquisition Integration1||13||8||-||-||( 21 )||21||15||0.07|
|Amortization of Acquired Intangibles2||18||13||-||( 31 )||( 31 )||31||20||0.09|
|Step-up of Acquired Inventory3||-||3||3||-||-||3||2||0.01|
|Adjusted||$ 214||$ 109||$ 892||$ 479||$ 569||$ 323||$ 212||$ 0.98|
CAREFUSION CORPORATION CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
|(in millions, except per share data)||December 31, 2014||June 30, 2014|
|Cash and Cash Equivalents||$ 1,846||$ 2,303|
|Trade Receivables, Net||517||574|
|Current Portion of Net Investment in Sales-Type Leases||228||290|
|Other Current Assets||147||84|
|Total Current Assets||3,275||3,721|
|Property and Equipment, Net||435||448|
|Net Investment in Sales-Type Leases, Less Current Portion||1,009||970|
|Intangible Assets, Net||972||1,016|
|Investments in Unconsolidated Entities||104||99|
|Total Assets||$ 9,198||$ 9,9655|
|LIABILITIES AND EQUITY|
|Current Portion of Long-Term Obligations and Other Short-Term Borrowings||$ 4||$ 454|
|Accrued Compensation and Benefits||168||194|
|Other Accrued Liabilities||244||246|
|Total Current Liabilities||693||1,195|
|Long-Term Obligations, Less Current Portion||1,998||1,990|
|Deferred Income Taxes||610||607|
|Commitments and Contingencies|
|Preferred Stock (50.0 Authorized Shares; $.01 Par Value) Issued – None||-||-|
|Common Stock (1,200.0 Authorized Shares; $.01 Par Value) Issued – 236.6 and 234.5 shares at December 31, 2014 and June 30, 2014,|
|Treasury Stock, at cost, 32.4 and 30.1 shares at December 31, 2014 and June 30, 2014, respectively||( 1,185 )||( 1,082 )|
|Additional Paid-In Capital||5,111||5,048|
|Accumulated Other Comprehensive Loss||( 135 )||( 43 )|
|Total Stockholders' Equity||5,507||5,390|
|Total Liabilities and Stockholders' Equity||$ 9,198||$ 9,655|
CAREFUSION CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
|Six Months Ended December 31,|
|Cash and Cash Equivalents at July 1||$ 2,303||$ 1,798|
|Cash Flows from Operating Activities:|
|Adjustments to Reconcile Net Income to Net Cash Provided by Operating Activities:|
|Depreciation and Amortization|
|Other Non-Cash Items||99||93|
|Change in Operating Assets and Liabilities, Excluding Impact of Acquired Assets and Assumed Liabilities:|
|Inventories||( 60 )||( 9 )|
|Net Investment in Sales-Type Leases||22||59|
|Accounts Payable||( 30 )||( 13 )|
|Other Accrued Liabilities and Operating Items, Net||( 179 )||( 79 )|
|Net Cash Provided by Operating Activities||206||297|
|Cash Flows from Investing Activities:|
|Cash Paid for Acquisitions, Net of Cash Received||( 37 )||( 501 )|
|Additions to Property and Equipment||( 49 )||( 37 )|
|Other Investing Activities||( 4 )||( 1 )|
|Net Cash Used in Investing Activities||( 90 )||( 539 )|
|Cash Flows from Financing Activities:|
|Repayment of Long-Term Obligations||( 452 )||( 1 )|
|Share Repurchase Programs||( 111 )||( 301 )|
|Proceeds from Stock Option Exercises||34||51|
|Other Financing Activities||( 2 )||( 8 )|
|Net Cash Used in Financing Activities||( 531 )||( 259 )|
|Net Effect of Exchange Rate Changes on Cash||( 42 )||12|
|Net Decrease in Cash and Cash Equivalents||( 457 )||( 489 )|
|Cash and Equivalents at December 31, attributable to Continuing Operations||$ 1,846||$ 1,309|
|Non-Cash Investing and Financing Activities|
|Asset Acquired by Entering into Capital Lease||$ -||$ 4|
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BD is one of the largest global medical technology companies in the world and is advancing the world of health by improving medical discovery, diagnostics and the delivery of care. The company supports the heroes on the frontlines of healthcare by developing innovative technology, services and solutions that help advance both clinical therapy for patients and clinical process for healthcare providers. BD and its 65,000 employees have a passion and commitment to help enhance the safety and efficiency of clinicians' care delivery process, enable laboratory scientists to accurately detect disease and advance researchers' capabilities to develop the next generation of diagnostics and therapeutics. BD has a presence in virtually every country and partners with organizations around the world to address some of the most challenging global health issues. By working in close collaboration with customers, BD can help enhance outcomes, lower costs, increase efficiencies, improve safety and expand access to healthcare. In 2017, BD welcomed C. R. Bard and its products into the BD family. For more information on BD, please visit bd.com
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