updated 12/13/2004 11:16:48 AM ET 2004-12-13T16:16:48

Cardinal Health Inc., a medical products and services company, plans to cut 4,200 jobs, or about 7 percent of its work force, and close 25 offices as part of a three-year restructuring plan, the company said Monday.

Its shares slipped but are up more than 55 percent in less than two months.

The cuts are part of a previously announced restructuring plan designed to improve earnings by $500 million a year, the company said. Cardinal has about 58,000 employees.

The company said in a regulatory filing in September that it planned to cut jobs but the number wasn’t made public until Monday. The company did not say what jobs would be cut, nor did it announce which of its 140 facilities it plans to close.

The cost of the restructuring will reduce earnings by 15 percent for the first half of 2005, excluding one-time charges, Cardinal said.

The first phase of the restructuring plan is expected to cost between $300 million and $350 million for employee severance and other costs, Cardinal said. About $53 million will be incurred during the second quarter.

The second phase of the restructuring includes combining administrative functions, improving efficiency in manufacturing and logistics and other plans aimed at increasing productivity and revenue growth.

The cost for the second phase hasn’t been finalized, the company said.

Cardinal Health already warned investors to expect lower earnings for the first half of 2005. Before that warning, the company had expected 10 percent growth per share for all of 2005.

The company also announced a $500 million stock buy-back that will be funded through normal cash flow.

Cardinal Health has acknowledged that the Securities and Exchange Commission subpoenaed company records relating to revenue classification and compensation information for several current and former employees.

The company twice delayed releasing its fourth-quarter results after disclosing the investigations. The results originally due out in July were released Oct. 26. The company’s chief financial officer, Richard Miller, also resigned.

For the three months ending June 30, Cardinal said it earned $393.5 million, or 90 cents a share, up 11 percent from $354.9 million, or 78 cents a share, a year earlier. Sales rose 11 percent to $16.92 billion compared with $15.18 billion a year ago.

For the fiscal year through June, the company said it made $1.5 billion, or $3.35 per share, compared with $1.4 billion, or $3.03 per share, a year ago. Sales rose 15 percent to $65 billion from $56.7 billion a year earlier.

The SEC began its investigation as an informal inquiry a year ago when it sought documents regarding money Cardinal Health received from vitamin manufacturers.

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