CareFusion Posts Strong Second-Quarter Earnings

CareFusion Corp. reported solid financial results for its fiscal second quarter. The San Diego, Calif.-based company will hand over a company in good bottom-line shape with its merger with BD concludes in the next few months.

In October, CareFusion and Franklin Lakes, N.J.-based BD agreed to purchase CareFusion in a cash and stock offer valued at more than $12 billion. The transaction is expected to close by March 31.

“Our team remained disciplined in their execution and saw the benefit from investments we’ve made during the past four years, with record quarterly results across the company,” said Kieran T. Gallahue, chairman and CEO of CareFusion. “In what will likely be the last reported quarter before our merger with BD, we have good momentum in all businesses, our customers see clear value in what we offer today and we have an even stronger vision for the future as part of BD.

“Results in the Medical Systems segment were again highlighted by the strength of our medication management offering, anchored by another quarter of strong committed contracts for our industry leading Pyxis dispensing technologies and Alaris infusion systems,” Gallahue said. “In the Procedural Solutions segment, we continued to grow faster than the market due to the strength of our clinically differentiated products and the impact of our Vital Signs acquisition. Outside the U.S.—where we have been actively refining our offerings and go-to-market models—we recorded double-digit revenue growth in Europe, Asia, Canada and Latin America.”

For the quarter (ended Dec. 31, 2014), consolidated revenue grew 16 percent to $1.07 billion compared to $922 million in the second quarter of fiscal year 2014, an 18 percent increase in constant currency. Growth in every business line and the impact of the Vital Signs acquisition contributed to strong revenue during the quarter, company officials reported.

Gross profit increased 15 percent from the prior year period to $535 million, with gross margins declining 50 basis points to 50 percent primarily due to expected changes in product mix associated with the acquisition of Vital Signs and installation costs for capital equipment. These pressures offset gross margin improvements from the Infusion Systems business line.

Operating income was $178 million, up 17 percent from $152 million in the prior year period. Excluding nonrecurring items, adjusted operating income grew 27 percent to $229 million.

The company reported net income of $173 million, or 83 cents per diluted share. Adjusted net income increased 78 percent from the prior year period to $206 million, or 99 cents per diluted share. As previously disclosed, CareFusion settled a tax audit with the Internal Revenue Service during the second quarter that had a positive impact on adjusted EPS for the quarter.

Second quarter revenue for the Medical Systems division was $645 million, a 10 percent increase from the prior year period on a reported basis, led by strong growth in all three business lines. The quarter was highlighted by growth in the Dispensing Technologies and Infusion Systems business lines where, according to the company, its medication management technology continued to “gain momentum” with U.S. hospitals. In addition, the segment grew capital equipment sales in all major sales regions outside the U.S. Segment profit for the quarter increased 15 percent to $125 million from $109 million in the prior year period. Adjusted segment profit increased 16 percent to $144 million.

Second quarter revenue for the Procedural Solutions unit was $424 million, a 27 percent increase from the prior year period on a reported basis, driven by growth in all three business lines and the addition of the Vital Signs products to CareFusion’s Specialty Disposables portfolio. Excluding the impact of acquisitions and planned discontinuation of certain contract manufacturing revenue, segment revenue increased 8 percent during the quarter led by growth of the company’s clinically differentiated products.

Segment profit increased 23 percent to $53 million from $43 million in the prior year period. On an adjusted basis, second quarter segment profit grew 49 percent to $85 million.

For the first six months of fiscal 2015, revenue increased 14 percent to $1.99 billion compared to $1.75 billion in the first half of fiscal 2014. Operating income totaled $304 million and income from continuing operations was $249 million, or $1.20 per diluted share. Adjusted operating income grew 22 percent to $395 million compared to $323 million in the first half of the prior year, with adjusted EPS growing 53 percent to $1.50 per diluted share.