Cardinal 2Q profit more than doubles on tax gain, sells unit to private equity company

Cardinal Health Inc. said Thursday it sold its pharmaceutical technologies and services business to private equity company, after announcing its second-quarter earnings more than doubled on a $425 million tax gain from the sale of another business.

The health care products and services company sold the business, which makes or packages medication for pharmaceutical and biotech companies, to Blackstone Group for $3.3 billion.

Cardinal announced in November its plan to sell the business, which generates $1.8 billion in revenue a year, so that it can concentrate on its health care provider customers, such as hospitals and pharmacies. The unit has 10,000 employees.

Cardinal said the deal should generate $3.1 billion after-tax and will be used to buy back shares. The deal should close in Cardinal's fourth quarter.

Shares of Cardinal rose $2.65 to $72.68 in morning trading on the New York Stock Exchange.

Cardinal said it earned $739.3 million, or $1.84 per share, for the quarter ended Dec. 31 compared with a profit of $304 million, or 66 cents a share, a year ago. The second-quarter tax gain will be offset when the sale is complete.

Revenue rose 13 percent to $21.8 billion from $19.3 billion a year ago.

Excluding the gain and other one-time charges, the company made $341 million, or 83 cents a share. Analysts surveyed by Thomson Financial were expecting earnings of 78 cents per share on sales of $21.5 billion.

"We performed well during the quarter with solid, top-line growth in each business segment, while maintaining the discipline in our operations to also deliver double-digit operating earnings growth in all four segments," R. Kerry Clark, Cardinal's president and chief executive, said in a statement.

Operating profit from Cardinal's main wholesale drug distribution business rose 19 percent to $328 million and revenue rose 13 percent to $19.2 billion. The unit was helped by strong sales of generic drugs combined with controls of expenses.

For the year to date, Cardinal recorded profit of $1 billion, or $2.45 a share, compared with $532.3 million, $1.23 per share, a year ago. Sales rose 12 percent to $42.7 billion from $38.2 billion.

Cardinal also announced it is buying SpecialtyScripts Pharmacy to broaden its specialty pharmaceutical services for drug makers. Terms of the deal were not disclosed. SpecialtyScripts specializes in providing drug therapies for chronic illnesses and complex diseases, such as HIV and cancer, according to its Web site.

Cardinal reiterated its full-year guidance of $3.25 to $3.40 a share from continuing operations, excluding the sale of the business. Analysts expect profits of $3.30 to $3.41 per share.

Shares of Cardinal

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On the Net:

Cardinal Health: http://www.cardinalhealth.com