Cardinal Health (CAH)
Q3 2011 Earnings Call
April 28, 2011 8:30 am ET
Jeffrey Henderson - Chief Financial Officer
George Barrett - Chairman, Chief Executive Officer and Chairman of Executive Committee
Sally Curley - VP IR
Michael Cherny - Deutsche Bank AG
Lisa Gill - JP Morgan Chase & Co
Ricky Goldwasser - Morgan Stanley
Steven Valiquette - UBS Investment Bank
Lawrence Marsh - Barclays Capital
Garen Sarafian - Citigroup Inc
Verdell Walker - Goldman Sachs Group Inc.
Eric Coldwell - Robert W. Baird & Co. Incorporated
Andrea Alfonso - Merrill Lynch
Previous Statements by CAH
» Cardinal Health's CEO Discusses Q2 2011 Results - Earnings Call Transcript
» Cardinal Health CEO Discusses F1Q2011 Results - Earnings Call Transcript
» Cardinal Health Q4 2010 Earnings Call Transcript
Thank you, Luanne, and welcome to Cardinal Health's Third Quarter Fiscal 2011 Conference Call. Today, we will be making forward looking statements. The matters addressed in these statements are subject to risks and uncertainties that could cause actual results to differ materially from those projected or implied. Please refer to the SEC filings and the forward-looking statement slide at the beginning of the presentation, which can be found on the Investor page of our website for a description of those risks and uncertainties. In addition, we will reference non-GAAP financial measures, information about these measures is included at the end of the slide.
Before I turn the call over to Chairman and CEO, George Barrett, I'd like to remind you of a few upcoming investor conferences and events in which we will be webcasting, notably the Deutsche Bank 36th Healthcare Conference on May 2 in Boston, the Bank of America Merrill Lynch 2011 Healthcare Conference on May 10 in Las Vegas, the Stanford Bernstein 27th Annual Strategic Decisions Conference on June 1 in New York, the Goldman Sachs 32nd Annual Global Healthcare Conference on June 7 in California and the William Blair 31st Annual Growth Stock Conference on June 14 in Chicago. The details of these events are or will be posted on the IR section of our website at cardinalhealth.com. So please make sure to visit the site often for that updated information. We look forward to seeing some of you at these upcoming events.
Now I'd like to turn the call over to George Barrett. George?
Good morning, everyone, and thank you for joining us on our third quarter call. I'm very pleased with our performance this quarter, which continued the momentum we built in the first half of fiscal 2011. We reported revenues for the third quarter of $26.1 billion, up 7% over the prior year period and a non-GAAP EPS number of $0.75, up 23%. This excellent overall performance was led by our Pharmaceutical segment, fueled by our Pharmaceutical distribution business and boosted by the contribution from acquisitions we completed earlier in the fiscal year.
These 3 strategic investments: P4, giving us a presence in oncology and specialty Pharmaceutical services; Kinray, dramatically increasing our footprint in community pharmacy; and Yong Yu, establishing a new platform for growth in China, one of the largest healthcare markets in the world, are already creating value for us. Our emphasis on execution, margin expansion and disciplined management of working capital is continuing to bear fruit. We have further enhanced the customer experience and strengthened our competitive position across all of our businesses and the new areas that help us position for future growth.
Based on our performance in the first 3 quarters of fiscal 2011, we are increasing our full year fiscal 2011 guidance and now expect our non-GAAP earnings to be in the range of $2.61 to $2.67. Jeff will walk you through our core assumptions during his remarks.
Now let me provide some color on each segment separately. Our Pharma segment continued its excellent performance in the third quarter. Revenue increased by 7%, and segment profit increased by 25% versus prior year. Including strong results from our Pharmaceutical distribution business and the contribution from P4, Kinray and Yong Yu.
Let me take a moment to discuss our Kinray and Yong Yu acquisitions. In both cases, their integration has progressed swiftly and seamlessly. Customer retention at Kinray is very high. In fact, since the acquisition, we have slightly increased our overall base in the New York metropolitan area. And as we've said in the past, we continue to support these customers using the same service model and with the same sales and customer service team with which they are familiar.
Similarly, the Yong Yu integration is going exceedingly well. Yong Yu's overall growth in the third quarter versus its performance in the same period last year is strong, largely driven by the local direct distribution business, a key area of focus for us.
In addition to the growth potential and distribution, we continue to be excited about the opportunities to offer many of the products and services we have developed in the U.S. to providers in China. Healthcare providers in both countries face similar challenges, increasing access, driving efficiencies in the supply chain, reducing costs and improving quality, and we can help. As you know, Jeff is leading our China Advisory Council, and he will provide additional color on Yong Yu in his remarks.
U.S. Pharmaceutical distribution did extremely well in the quarter, driven by excellent performance in our Generics program, solid performance under our branded manufacturer agreements and strong sales in our retail base. Sales under our SOURCE Generic program increased by 32%, with overall generic sales up by 23%. Thus far, our fiscal 2011 has been an outstanding year for generics both in terms of our based generics performance, as well as the number and the value of new launches.