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Cardinal Health Earnings Slide

Excluding charges, earnings of 89 cents a share match estimates.
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Cardinal Health's

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fourth-quarter earnings slid 27% from a year ago due to big charges for restructuring and legal costs. The pharmaceuticals industry supplier guided its current fiscal year in line with estimates.

Cardinal earned $287.2 million, or 66 cents a share, in the quarter, compared with $393.5 million, or 90 cents a share, a year ago. The latest quarter included charges for restructuring, mergers, litigation and legal expenses totaling $52 million, or 12 cents a share, plus a separate charge of $44 million, or 11 cents a share, for writedowns and other issues.

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Backing out the charges, Cardinal earned 89 cents a share in the quarter, matching the Thomson First Call consensus. Cardinal's fourth-quarter revenue rose 15% from a year ago to $19.5 billion, above the $19.26 consensus.

Like its competitors, Cardinal has spent the last year trying to transition to a new business model that de-emphasizes so-called indirect compensation from drug companies in favor of straight-out payment for services. The company has also been dogged by a probe of the secondary drug market by New York Attorney General Eliot Spitzer, receiving a subpoena in April.

In the fourth quarter, Cardinal's biggest division, pharmaceutical distribution and provider services, saw revenue rise 16% to $15.8 billion. The division posted an 18% increase in operating profit to $326 million, reflecting an inventory credit that cut expenses by $48 million.

"Excluding these items, solid earnings growth was the result of an increase in volume to retail chains and a profitable mix of generic drugs," the company said. Cardinal said its return on sales during the second half of fiscal 2005 rose by 80 basis points over the first half.

For fiscal 2006, Cardinal reiterated guidance for earnings of $3.30 to $3.55 a share, excluding items. Analysts surveyed by Thomson First Call were expecting $3.39 a share.