This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration. Need a new registration confirmation email? Click here
March 19, 2013 /PRNewswire/ -- Cardinal Health announced today that its pharmaceutical distribution contract with Walgreen Co. (Walgreens), which is scheduled to expire at the end of
August 2013, will not be renewed.
"Although we are not yet ready to provide fiscal 2014 earnings guidance, our portfolio has considerable balance and we have prepared strategies to mitigate the impact of a Walgreens nonrenewal. Based on this, we will target a 2014 non-GAAP diluted earnings per share from continuing operations
1 to be at least similar to the fiscal year 2013 guidance range of
$3.42 to $3.50 we provided in our fiscal 2013 second quarter earnings release. We intend to provide more color on fiscal 2014 during our fiscal 2013 third and fourth quarter earnings calls," said
George Barrett, Chairman and CEO.
The company also noted that earnings for the current fiscal year 2013 would not be negatively impacted as the current Walgreens agreement remains in place throughout fiscal 2013.
Sales to Walgreens, one of Cardinal Health's two largest customers, generated approximately 21 percent of consolidated revenue for fiscal 2012. For this period, approximately 60 percent of revenue from Walgreens was classified as bulk sales, which, as described in the Form 10-K for the fiscal year ended
June 30, 2012, has significantly lower segment profit as a percentage of revenue than non-bulk sales. Walgreens bulk and non-bulk sales have meaningfully less segment profit as a percentage of revenue than average bulk and non-bulk sales. After the expiration of this contract, the company also anticipates a significant net working capital decrease based on reduced inventory and accounts receivable, partially offset by reduced accounts payable. Based on the expected working capital decrease and other factors, it is anticipated that the expiration of the Walgreens contract will result in a meaningful net, after-tax benefit to cash flow from operating activities in fiscal 2014.
1(1) Non-GAAP diluted earnings per share from continuing operations: earnings from continuing operations (A) excluding (1) restructuring and employee severance, (2) acquisition-related costs (including amortization of acquisition-related intangible assets), (3) impairments and loss on disposal of assets, (4) litigation (recoveries)/charges, net, and (5) other spinoff costs, each net of tax, (B) divided by diluted weighted average shares outstanding.
Non-GAAP Financial MeasuresCardinal Health presents non-GAAP diluted earnings per share from continuing operations on a forward-looking basis. The most directly comparable forward-looking GAAP measure is diluted earnings per share from continuing operations. The company is unable to provide a quantitative reconciliation of this forward- looking non-GAAP measure to the most directly comparable forward-looking GAAP measure, because the company cannot reliably forecast restructuring and employee severance, acquisition-related costs (including amortization of acquisition-related intangible assets), impairments and loss on disposal, and litigation (recoveries)/charges, which are difficult to predict and estimate. Please note that the unavailable reconciling items could significantly impact the company's future financial results.