Cardinal Health 2011 Annual Report Download - page 46

I
tem 7: Management’s Discussion an
d
Ana
ly
sis o
f
Financia
l
Con
d
ition an
d
Resu
l
ts o
f
O
p
eration
s
T
he discussion and analysis presented below refers to, and should be read in conjunction with, the
conso
lid
ate
dfi
nanc
i
a
l
statements an
d
re
l
ate
d
notes
i
nc
l
u
d
e
di
nt
hi
s Form 10-K. Un
l
ess ot
h
erw
i
se
i
n
di
cate
d,
throu
g
hout this Mana
g
ement’s Discussion and Anal
y
sis of Financial Condition and Results of Operations, we are
referring to our continuing operations.
Execut
i
ve
O
verv
i
ew
We are a
h
ea
l
t
h
care serv
i
ces company prov
idi
ng p
h
armaceut
i
ca
l
an
d
me
di
ca
l
pro
d
ucts an
d
serv
i
ces t
h
at
h
e
lp
pharmacies, hospitals, sur
g
er
y
centers, ph
y
sician offices and other healthcare providers focus on patient car
e
while reducing costs, enhancing efficiency and improving quality. We report our financial results in two
segments: P
h
armaceut
i
ca
l
an
d
Me
di
ca
l.
D
uring fiscal 2011, we achieved record revenue of
$
102.6 billion and increased our operating earnings b
y
16 percent to
$
1.5 billion. We also acted on important strategic priorities that will strengthen our long-term
position. We expanded our retail independent customer base si
g
nificantl
y
with the Kinra
y
acquisition, created
strong growth from our generic pharmaceutical programs, significantly enhanced our specialty business with th
e
P4 Hea
l
t
h
care acqu
i
s
i
t
i
on, an
dl
aunc
h
e
d
a growt
h
p
l
at
f
orm
i
nC
hi
na w
i
t
h
our Yong Yu acqu
i
s
i
t
i
on.
D
uring fiscal 2011, our Pharmaceutical segment profit increased by 26 percent, primarily due to strong
per
f
ormance
i
n our gener
i
cp
h
armaceut
i
ca
l
programs,
i
nc
l
u
di
ng t
h
e
i
mpact o
f
new pro
d
uct
l
aunc
h
es, so
lid
performance under our branded manufacturer a
g
reements, and the positive impact of acquisitions. Our Medical
segment profit decreased by 14 percent, adversely affected by the increased cost of commodities used in our self-
manu
f
acture
d
an
d
pr
i
vate
b
ran
d
pro
d
ucts.
A
lso during fiscal 2011, we paid quarterly cash dividends of
$
0.195 per share, or
$
0.78 per share on an
a
nnua
li
ze
db
as
i
s, an
i
ncrease o
f
11 percent over
fi
sca
l
2010. In May 2011, t
h
e
b
oar
d
o
fdi
rectors a
l
so approve
d
a
10 percent increase in the quarterl
y
dividend be
g
innin
g
in Jul
y
2011
.
O
ur cash and equivalents balance was
$
1.9 billion at June 30, 2011, compared to
$
2.8 billion at June 30
,
2010. We used $2.3 billion for acquisitions and received $1.4 billion of net cash provided b
y
operations and $706
million from the sale of our remaining investment in CareFusion. We plan to continue to execute a balanced
d
ep
l
oyment o
f
ava
il
a
bl
e cap
i
ta
l
to pos
i
t
i
on ourse
l
ves
f
or susta
i
na
bl
e compet
i
t
i
ve a
d
vantage an
d
to en
h
anc
e
shareholder value.
Trends
Within our Pharmaceutical segment, we expect branded pharmaceutical price appreciation in fiscal 2012 t
o
b
es
i
m
il
ar to
fi
sca
l
2011. We a
l
so expect s
i
gn
ifi
cant new gener
i
cp
h
armaceut
i
ca
ll
aunc
h
es
i
n
fi
sca
l
2012;
h
owever, their impact on our
g
ross mar
g
in can var
y
si
g
nificantl
y
dependin
g
on timin
g
, size, and number o
f
entrants, and may be less in fiscal 2012 than in fiscal 2011. In addition, we expect our recent acquisitions to hav
e
a
pos
i
t
i
ve year-over-year
i
mpact on revenue an
d
operat
i
ng earn
i
ngs. F
i
na
ll
y, we may
h
ave a negat
i
ve
i
mpact
f
rom a LIFO char
g
e in fiscal 2012
.
W
i
t
hi
n our Me
di
ca
l
segment, var
i
a
bili
ty
i
nt
h
e cost o
f
commo
di
t
i
es suc
h
as o
il
-
b
ase
d
res
i
ns, cotton,
l
atex,
d
iesel fuel and other commodities can have a si
g
nificant impact on the cost of products sold. In fiscal 2012, we
a
nticipate a negative year-over-year impact from higher commodity prices. In addition, given the current
econom
i
can
dh
ea
l
t
h
care env
i
ronments, we expect
h
ea
l
t
h
care ut
ili
zat
i
on,
i
nc
l
u
di
ng surg
i
ca
l
proce
d
ures, to rema
in
somewhat slu
gg
ish in fiscal 2012.
20