Health, Restructuring, Cardinal, Phase, Plan, Service
Cardinal Health to engage in shared services in Phase 2 of its restructuring plan
-
|
- Print |
- Email Page
Cardinal Health, Inc., the leading provider of products and services supporting the health care industry, today announced details of a previously disclosed three-year restructuring plan expected to improve annual operating earnings by $500 million.
The company also announced that its board of directors has authorized the purchase up to $500 million of its common shares as management deems appropriate.We are bringing the company together by integrating externally to align our businesses for customers and internally to become even more efficient, said Robert D. Walter, chairman and chief executive officer of Cardinal Health. “Both actions - integrating externally and integrating internally -- will help us deliver even more value to customers and improve returns to shareholders.
The restructuring supports “One Cardinal Health, a long-term program launched by the company to increase the value it provides customers through better integration of existing businesses and improved efficiency from a more disciplined approach to procurement and resource allocation.
The restructuring will be implemented in two phases over a three-year period, the company said.
Phase One of Restructuring Plan
The cost to execute the first phase of restructuring is estimated to be $300 million to $350 million, for asset impairment, employee severance and other costs. Cost savings and profit improvements from this phase are expected to add $125 million to operating earnings in fiscal 2005 and reach an annualized amount of $200 million for fiscal 2006.
The company expects to reduce its 58,000 global workforce by 4,200 during this phase, primarily through business consolidations and process improvements, resulting in the closing of approximately 25 facilities worldwide. More than 100 profit-improvement actions underway include rationalizing and discontinuing overlapping or underperforming product lines and improving product pricing.
Phase Two of Restructuring Plan
The second phase of the restructuring will focus on longer term integration to drive top line growth and create greater productivity, including:
-- Company-wide, world-class shared services for administrative functions such as finance, human resources and information technology.
--Strategic sourcing to better leverage Cardinal Health's global scale and purchasing power.
--An integrated go-to-market strategy for the company's hospital and pharmaceutical manufacturer customers.
--Efficiency and quality improvement plans across Cardinal Health's manufacturing and logistics operations.
Through specific projects already identified, the company expects the financial benefit of phase two to be $250 million to $350 million in annual operating earnings improvements. The cost to implement phase two has not been finalized and will be announced at a future date following approval by the board of directors.
Through the One Cardinal Health program we are focused on building lasting discipline into our operations, making the company more agile and driving organic growth well into the future, said George L. Fotiades, president and chief operating officer of Cardinal Health.
Fiscal 2005 Financial Impact and Outlook
Of the phase one restructuring costs, the company expects approximately $230 million to $270 million will be recognized as special items in the quarters in which the costs are incurred. Approximately $70 million to $80 million of the costs to write down impaired assets will be recognized as non-recurring operating expenses. Of this amount, approximately $53 million will be incurred during the second quarter, reducing operating results for the period.
The company now expects earnings per share for the first half of fiscal 2005 to decline approximately 15 percent, excluding special items and non-recurring charges. Non-recurring charges primarily relate to $53 million for the impaired assets announced today. The company continues to forecast a much stronger second half for the fiscal year, with full-year earnings-per-share growth in the low single digits, excluding special items and non-recurring charges. Achievement of this growth is dependent on benefits of the restructuring program and operational progress, most notably in the pharmaceutical distribution business. These new expectations are below the company's previously stated goal of at least 10 percent earnings-per-share growth for fiscal 2005.
-
|
- Print |
- Email Page
Can BPO provide more cost reduction, risk management, and quality improvement? When? Obtain a neutral perspective, clear evaluation criteria, and concrete examples.29 Jul 2008 | (Case Study)
Shared Services Versus BPOWhat Business leaders need to know when deciding about Internal or Outsourced Models29 Jul 2008 | (Thinking Point)
Capgemini to Acquire and Manage Unilever Financial Shared Services in Latin AmericaCapgemini announces that it has signed an agreement with Unilever to acquire and manage its financial shared service centers in Santiago, Chile, and Sao Paulo, Brazil.09 Apr 2008 | (News)
Shared Services and Outsourcing — Evolution Into a Hybrid ModelAs organizations are increasingly combining internal shared services and outsourcing models into a flexible, new “hybrid”, TPI examines the steps leading to the development of this hybrid and discusses...08 Apr 2008 | (Thinking Point)
Extracting Full Value From Your Shared Services OrganisationSince the early 1990s, shared services have been seen as a key vehicle for transforming back office support activities, however many shared services organizations are failing to meet their full potential....08 Apr 2008 | (Thinking Point)
