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Cardinal Health Conference Call Highlights

Shazir Mucklai

Cardinal Health (NYSE: CAH) reported its quarterly earnings on Monday. Shares of the company are down 4.2 percent.

Below are some key highlights from its conference call:

Global, Growth, Results:

• Non-GAAP operating earnings grow 4 percent to $2.1 billion, while non-GAAP diluted earnings per share were $3.84, up 3 percent.
• And our gross margin rate expanded by 80 basis points to 5.7 percent for the year.
• Our team continued to drive capital efficiency this year, generating $2.5 billion in cash from operations.
• We returned over $1.1 billion to shareholders in fiscal 2014 through both our strong dividend and share buybacks.
• And I'm very pleased that we're able to provide our investors with a total shareholder return of 46.7 percent a year.
• Walgreens would have been a robust 8 percent for our Pharmaceutical segment. Our overall Pharmaceutical segment profit margin expanded almost 30 basis points for the year.
• Current data suggest that generics now represent over 85 percent of all prescriptions in the United States.
• Moving to the Medical segment, fiscal 2014 revenues grew 9 percent. Margin rate expanded by 35 basis points and segment profit grew at almost 20 percent.
• Our medical consumables business has represented an opportunity to use our scale to bring significant savings to the healthcare system, while at the same time expanding our margins.
• We saw full-year sales growth of 6 percent and launched over 500 new SKUs during FY 2014.
• A few comments on China. China has continued to be an outstanding growth story for us. In 2014, we grew revenues by 30 percent reaching $2.6 billion.
• So with this as backdrop, we are guiding to a fiscal year 2015, non-GAAP EPS range of $4.10 to $4.30.
• SG&A expenses moderately increased by 2.5 percent in Q4, driven by recent acquisitions and year-over-year compensation related items.
• Our consolidated non-GAAP operating margin rate increased 16 basis points to over 2 percent.
• The non-GAAP tax rate for the quarter was about 34 percent versus the prior year's 37 percent. This period lower rate is related to favorable state tax outcomes in the quarter.
• We have over $700 million remaining under board authorized repurchase program.
• Moving onto the consolidated cash flows and the balance sheet. Our operations generate $715 million in cash flow during the quarter.
• Pharma segment profit decreased by 5 percent to $377 million, primarily driven by the continued impact of the Walgreens contract termination, which was partially offset by strong performance in our generic programs.


• As George stated, for fiscal 2015, we expect our non-GAAP earnings per share to be in the range of $4.10 and $4.30 and we expect revenues will increase modestly.
• We expect net interest and other expense of $140 million $150 million.
• As the Medical segment performance ramps over fiscal 2015, we expect a relatively flat utilization environment in the acute settings and mid single-digit growth in the home setting.

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