Cardinal Health Formalizes Consolidation of Businesses into Two Primary Operating and Reporting Segments
DUBLIN, Ohio.— Cardinal Health, a global provider of products and services that improve the safety and productivity of health care, today announced a consolidation of its businesses into two primary operating and reporting segments to reduce costs and align resources with the unique needs of each segment.
Cardinal Health’s network of pharmaceutical and medical product distribution centers and nuclear pharmacies will form the Healthcare Supply Chain Services segment, led by Vice Chairman George S. Barrett. With annual revenue of more than $80 billion, this segment serves customers in North America with efficient and secure distribution services for prescription medicine and medical products.
Industry leading products for infusion, medication dispensing, respiratory care and infection prevention will be grouped in the Clinical and Medical Products segment under the leadership of Vice Chairman David L. Schlotterbeck. With annual revenue of approximately $5 billion, this segment serves global customers with clinically differentiated products used in hospitals and other primary care facilities.
The segments will be connected by a lean corporate organization and Cardinal Health’s hospital sales force.
With these changes, the company will reduce its workforce by approximately 600 positions under a restructuring charge of approximately $63 million, the substantial majority of which it expects to recognize in the current fiscal year, which began July 1. Of those positions, about 160 are currently open and will not be filled. Employees affected will be offered severance benefits.
“Through this restructuring, we sharpen our focus on two distinct, large and growing segments of the health care industry by aligning our resources, reducing costs and helping to speed decision making for our customers,” said R. Kerry Clark, chairman and CEO of Cardinal Health. “In many ways, these changes formalize the organization we began to put in place 18 months ago and will make us a stronger company that has a greater focus on both our supplier-customers and provider-customers, with a goal of creating more value for shareholders.
“In fiscal ’09, we remain committed to the turn-around of our pharmaceutical supply chain business, as we continue to strengthen our medical supply chain business, invest in an innovative pipeline of clinical products and ensure we have strong regulatory compliance programs in place across the company. We will also continue to optimize our portfolio to strengthen the core business. In all, we will do fewer things exceptionally well, all under our mission to make health care safer and more productive.”
Healthcare Supply Chain Services
The Healthcare Supply Chain Services segment consolidates pharmaceuticals and medical products from thousands of manufacturers into site-specific deliveries to retail pharmacies, hospitals, physician offices, surgery centers and alternate care facilities. With more than 18,000 employees in operations across North America, Cardinal Health provides comprehensive financial, inventory, contract management and marketing services. Cardinal Health is also the largest provider of specialized nuclear pharmaceuticals, delivering more than 13 million doses each year to hospitals and outpatient care centers.
Clinical and Medical Products
The Clinical and Medical Products segment manufactures medication infusion and dispensing products, respiratory equipment, surgical instruments and leading technologies and services that help hospitals prevent medication errors, reduce hospital-acquired infections and manage medications and supplies more efficiently. Cardinal Health products provide protection against medication errors for more than 3.1 billion doses each year using CareFusion® patient identification systems, Alaris® infusion devices and Pyxis® medication dispensing systems. Infection prevention products include Convertors® brand surgical gowns, Esteem® brand medical gloves, Chloraprep® brand preoperative skin preparation products, as well as electronic infection surveillance through MedMined® services. The segment also leads in the respiratory care category through its AVEA® respirators and other leading ventilation brands. Clinical and Medical Products’ global operations employ more than 20,000 people on five continents.
As part of the restructuring, Cardinal Health will also separately report results for a group of other businesses as a third reporting segment. These units include Pharmacy Services (outsourced hospital pharmacy management services), Tecomet (orthopedic implants and instruments), Medsystems (enteral devices and airway management products) and Medicine Shoppe International. While these businesses continue to add value to Cardinal Health, the company will be conducting an in-depth review during the next 12 months to evaluate their fit in the existing segment structure.
Outlook and Q4 Earnings Call
The company reaffirmed that non-GAAP diluted earnings per share from continuing operations1 for fiscal 2008 are expected to be about in the middle of a $3.75 to $3.85 range, excluding the potential dilutive impact of the Enturia acquisition of 1 to 2 cents.
Cardinal Health will announce fourth quarter and full-year results on Aug. 7 during an extended call with financial analysts and investors. At that time, the company will provide its financial outlook for the current year and provide historic financial data, recast according to the new reporting segments. Going forward, the company will report and provide guidance based on the primary segments with relevant metrics for the key underlying businesses in each.
The Aug. 7 conference call and webcast will begin at 8:30 a.m. EDT at the Investor page of www.cardinalhealth.com. The conference call may also be accessed by dialing 617-213-4850, passcode 97674427.
Participants are advised to pre-register at the Investor page at www.cardinalhealth.com or to dial into the call at least ten minutes prior to the start time. Pre-registrants are issued a pin number that provides faster access to the live call. Presentation slides, an audio replay and a transcript will be archived on the Web site after the conclusion of the meeting. The audio replay will also be available until 11:30 p.m. EDT on August 9 by dialing 617-801-6888, passcode 28260453.
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