Carefusion FY 3Q13 Earnings Call Notes

This post is part of a series of posts called “Company Notes.” These posts contain quotes and exhibits from earnings calls, conference presentations, analyst days and SEC filings. The quotes are generally pieces of information that I find interesting or helpful to understanding the company, industry or economy and are not meant to provide summaries of the full content of the call. Other posts in this series can be found by clicking here. Full transcripts can be found at Seeking Alpha.

“Being a hospital CEO right now has got to be one of the tougher jobs out there, right? They’ve got a shifting revenue line. They’re running multiple business models at the same time. They’re looking at the effects of external factors on their business. And quite frankly, it’s just led them to be a bit cautious in their approach. Now on the — the benefit side of it is, over the last, oh, I’d say, 6 months, 9 months, but really, it seems to have been accelerating, there seems to be more and more a real understanding that these institutions need to drive operational simplicity, and they have to do it in a way that’s not going to compromise patient safety. And every conversation — I could walk through multiple conversations I have had with CEOs of hospitals or with other senior sort of C-level administrators within these health systems. They’re trying to understand how they can drive out costs, how they can get control of their costs, how they can increase visibility of their operations, how they can reduce variability in their service lines, and do it in a way that’s profitable and do it in a way that helps improve patient safety. That’s our positioning. So what we’ve seen from a transaction perspective is it just made them a bit cautious at the moment. They are — we’re not hearing nos. I mean, competitively, we’re doing quite well, actually. These transactions are not being canceled. They’re just — they’re basically stuck on the desk, while these operations, while these leaders say, “Listen, I just need to understand my next steps better.”

“The systems business, we should all just remind ourselves that we’re a little different than what you’d call classic capital business, right? Capital businesses, when they are lumpy, they’re truly lumpy throughout the whole income statement, they’re lumpy through the cash flows, et cetera. We call it a systems business because it is a systems business. And so our — for instance, our Pyxis business, yes, when there are some elongation in the decision cycle, that may hurt the revenues — the revenue top line short-term, but that just means that they’re extending out their current operating leases, our cash flow looks great.”

“let’s put ourselves in the position of these hospital CEOs and the C-suite people. They are trying to drive down their costs. They’re trying to do it in a way — increase nurse ratios where it was 1 nurse to 4 patients. Now they want 1 nurse to 6 patients. They’re trying to control their medication expenses. And while they’re doing it, they really, really want to make sure that they’re taking care of these patients and they’re not risking them. That’s what we’re doing. That’s what our strategy is all about.”

“Hospital CEOs…they’re focused on efficiencies. They know that to succeed, they have to drive operational simplicity within their operations.”

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