UPDATE: CareFusion 4Q Profit Down On Charges;Job Cuts Planned
10 Agosto 2010 - 8:29PM
Dow Jones News
CareFusion Corp. (CFN) said Tuesday its fiscal fourth-quarter
earnings fell 46% on a host of charges and announced restructuring
moves that will trim nearly 5% of the work force while targeting
more than $100 million in annual savings.
Company officials said the maker of drug-delivery systems and
infection-prevention tools had a better first year than they
expected during the spin-off last August from Cardinal Health Corp.
(CAH). But the restructuring moves, which will involve shedding
about 700 positions, build on previous comments that the
post-spin-off CareFusion needed to address its operating margins to
better compare with peers, Chairman and Chief Executive David
Schlotterbeck said.
"These actions will provide a solid base and allow us to gain
efficiencies as we grow our business," he said on a conference call
with analysts.
The company said the job cuts involve shedding management layers
and also affect "support functions." It anticipates $85 million to
$95 million in pre-tax savings in the recently started fiscal year,
with savings rising another $25 million the following year. It
expects restructuring efforts to trigger non-recurring costs of $40
million to $50 million this year.
Shares of the San Diego-based company moved up 3.5% to $22.15 in
after-hours trading after slipping 1.5% during Tuesday's regular
trading hours. The shares have traded down 14% on the year.
Schlotterbeck also noted that CareFusion will continue to
analyze its portfolio and expects to make decisions during the new
fiscal year to divest certain operations that aren't a good fit or
dilute operating margins. It's too soon to say what businesses
could be cut, but there are "clear opportunities" to redeploy
capital, he said.
Another priority in the new year is to aggressively pursue
drug-infusion pump business as competitor Baxter International Inc.
(BAX) works through a two-year effort to pull about 200,000 of its
"Colleague" brand pumps from the U.S. market. Baxter is offering
replacement devices or refunds following years of product
issues.
Schlotterbeck indicated CareFusion will use low prices to
attract customers, which he said could hurt margins in the near
term but pay off down the road. Hospira Inc. (HSP) is another major
player in the market for these pumps, which are ubiquitous devices
used in hospitals to deliver fluid and drugs intravenously.
"By converting share now we will benefit for an extended period
into the future through our disposals business," Schlotterbeck
said. He said it was premature to estimate how much Baxter business
CareFusion will take.
For the quarter ended June 30, CareFusion reported a profit of
$52 million, or 23 cents a share, down from $96 million, or 44
cents a share, a year earlier. Excluding spinoff and other charges,
earnings from continuing operations were 38 cents a share in the
recent quarter. Revenue jumped 19% to $1.04 billion.
Analysts polled by Thomson Reuters had most recently forecast
earnings of 37 cents a share on $1.02 billion in revenue for the
recent quarter.
Gross margin rose to 46.9% from 46.4%.
Looking ahead, CareFusion projected earnings for the new fiscal
year of $1.58 to $1.68 a share on a mid-single-digit sales gains on
a percentage basis. Analysts anticipated earnings of $1.62 a share
and revenue rising 6% to $4.13 billion.
-By Jon Kamp, Dow Jones Newswires; 617-654-6728;
jon.kamp@dowjones.com
(Nathan Becker and Kevin Kingsbury contributed to this
report.)
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