Cardinal Health (CAH)
Q1 2013 Earnings Call
October 30, 2012 8:30 am ET
George S. Barrett - Chairman, Chief Executive Officer and Chairman of Executive Committee
Jeffrey W. Henderson - Chief Financial Officer
John Kreger - William Blair & Company L.L.C., Research Division
Robert P. Jones - Goldman Sachs Group Inc., Research Division
David Larsen - Leerink Swann LLC, Research Division
Lisa C. Gill - JP Morgan Chase & Co, Research Division
Ross Muken - ISI Group Inc., Research Division
Charles Rhyee - Cowen and Company, LLC, Research Division
John W. Ransom - Raymond James & Associates, Inc., Research Division
May Zhan - Morgan Stanley, Research Division
Eric W. Coldwell - Robert W. Baird & Co. Incorporated, Research Division
Previous Statements by CAH
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Thank you, Kate, and welcome to Cardinal Health's first quarter fiscal 2013 earnings conference call. Today, we will be making forward-looking statements. The matters addressed in the 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 statements slide at the beginning of the presentation which can be found on the Investor page of our website for a description of risks and uncertainties.
In addition, we will reference non-GAAP financial measures. Information about these measures is included at the end of the slides.
I would also like to remind you of a few upcoming investment conferences and events in which we will be webcasting. Notably, our Annual Meeting of Shareholders at 8:00 a.m. local time this Friday, November 2, at our company headquarters here in Dublin, Ohio and the Credit Suisse Healthcare Conference at 8:30 a.m. local time on November 14 at the Arizona Biltmore Hotel in Phoenix. The detail of these events are or will be posted in the IR section of our website at cardinalhealth.com, so please make sure to visit the site often for updated information. We look forward to seeing you at the upcoming events. Now I'd like to turn over the call to our Chairman and CEO, Mr. George Barrett.
George S. Barrett
Thanks, Sally. Good morning, everyone, and thanks for joining us on our first quarter call today. I know that those of you on the East Coast are going through an extraordinarily difficult time and hope that your families and your homes are safe. I'll touch on this again after I cover our performance for the quarter.
We're off to a solid start to our fiscal year 2013. Total revenue for the quarter was $25.9 billion, a decline of 3.4% from the prior year. As you know, we expected revenue to be down for the quarter and for the full year primarily due to the continued shift in dollars associated with the conversion of brand to generic drugs. Non-GAAP operating earnings increased by 6% to $469 million. Our non-GAAP EPS grew 11% to $0.81, up from last year's $0.73.
Our Pharmaceutical segment delivered strong profit growth of 10% on a revenue decline of 4%. This revenue decline resulting from the generic conversions masked the positive sales growth from net customer wins and higher volume in Specialty Solutions. The Pharma segment realized significant margin improvement due to the robust performance under our generic programs and a result of our continued focus on customer and product mix.
Medical segment revenues were up slightly versus the same period a year ago and profit declined by 6%. The profit contribution for medical was less than we expected for the period due to the impact of lower volume with existing customers, as well as the net negative year-on-year impact from our systems implementation we initiated in fiscal 2012. I'll come back to both of these subjects in a moment when I review the segments.
First, the Pharmaceutical segment. Our Pharmaceutical distribution business continued its momentum coming out of fiscal year 2012. From a customer and product mix standpoint, we're seeing continued progress. Our non-bulk sales were 63% of total sales in the quarter versus 57% last year, which is helping to drive an overall improvement in margin. Pharmaceutical distribution profit was also fueled by the continued strength of our generic activities. According to IMS data, total generic utilization now accounts for almost 81% of total prescriptions in the United States versus around 77% a year ago. Clearly, it is important for us to be best-in-class in generics and our progress here continues to be encouraging. Our strong generic results reflect robust sales to our customers and strong response to new item introductions during the quarter.
We continue to record solid performance and build strong relationships with our branded and biotech partners as we support their evolving business needs.
Moving to Nuclear, demand in our low-energy legacy business continues to be soft as the number of nuclear cardiac procedures remains considerably below historical norms. With this in mind, we continue to review our service model, and as a result, we've pursued cost reductions and other efficiencies. In addition, we've made capacity adjustments to align with current cardiac procedure demand. Having said this, our Positron Emission Tomography or PET business continues to be well positioned for the future. We believe PET holds excellent promise and we are investing appropriately. We recently opened 2 new PET cyclotrons in Sacramento and Portland, with an additional site in Chicago expected in the coming weeks.