Statement Of Income
Statement Of Income (USD $) | ||||
In Millions, except Per Share data | 3 Months Ended
Dec. 31, 2009 | 3 Months Ended
Dec. 31, 2008 | 6 Months Ended
Dec. 31, 2009 | 6 Months Ended
Dec. 31, 2008 |
Revenue | 24919.7 | 24117.8 | 49700.4 | 47554.9 |
Cost of products sold | 23,962 | 23202.7 | 47833.9 | 45738.6 |
Gross margin | 957.7 | 915.1 | 1866.5 | 1816.3 |
Operating expenses | ||||
Distribution, selling, general and administrative expenses | 605.2 | 578.5 | 1191.3 | 1168.8 |
Restructuring and employee severance | 10.7 | 16.9 | 70.4 | 37.6 |
Impairments and loss on sale of assets | 0.4 | 6.9 | 24 | 10.5 |
Litigation (credits)/charges, net | -25.4 | -0.3 | -25.9 | -0.3 |
Operating earnings | 366.8 | 313.1 | 606.7 | 599.7 |
Other (income)/expense, net | -25.6 | 19.7 | -34.5 | 22.2 |
Interest expense, net | 27.4 | 22.2 | 61.3 | 51.4 |
Loss on extinguishment of debt | 0 | 0 | 39.9 | 0 |
Earnings before income taxes and discontinued operations | 365 | 271.2 | 540 | 526.1 |
Provision for income taxes | 134.8 | 102.2 | 371.6 | 184.9 |
Earnings from continuing operations | 230.2 | 169 | 168.4 | 341.2 |
Earnings from discontinued operations (net of tax expense of $2.4 and $56.7, respectively, for the three months ended December 31, 2009 and 2008 and $28.4 and $88.7, respectively, for the six months ended December 31, 2009 and 2008) | 4.3 | 147.5 | 27.9 | 224.4 |
Net earnings | 234.5 | 316.5 | 196.3 | 565.6 |
Basic earnings per Common Share: | ||||
Continuing operations | 0.64 | 0.48 | 0.47 | 0.96 |
Discontinued operations | 0.01 | 0.41 | 0.08 | 0.62 |
Net basic earnings per Common Share | 0.65 | 0.89 | 0.55 | 1.58 |
Diluted earnings per Common Share: | ||||
Continuing operations | 0.64 | 0.47 | 0.47 | 0.95 |
Discontinued operations | 0.01 | 0.41 | 0.07 | 0.62 |
Net diluted earnings per Common Share | 0.65 | 0.88 | 0.54 | 1.57 |
Weighted average number of Common Shares outstanding: | ||||
Basic | 359 | 357.3 | 359.1 | 357 |
Diluted | 361 | 360.3 | 361.1 | 361.2 |
Cash dividends declared per Common Share | 0.175 | 0.14 | 0.35 | 0.28 |
Statement Of Income (Parentheti
Statement Of Income (Parenthetical) (USD $) | ||||
In Millions | 3 Months Ended
Dec. 31, 2009 | 3 Months Ended
Dec. 31, 2008 | 6 Months Ended
Dec. 31, 2009 | 6 Months Ended
Dec. 31, 2008 |
Earnings from discontinued operations, tax | 2.4 | 56.7 | 28.4 | 88.7 |
Statement Of Financial Position
Statement Of Financial Position Classified (USD $) | ||
In Millions | Dec. 31, 2009
| Jun. 30, 2009
|
Current assets: | ||
Cash and equivalents | 1746.8 | 1221.6 |
Trade receivables, net | 4927.5 | 5214.9 |
Inventories | 7,961 | 6832.8 |
Prepaid expenses and other | 674.1 | 523 |
Assets from businesses held for sale and discontinued operations | 148.9 | 7189.4 |
Total current assets | 15458.3 | 20981.7 |
Property and equipment, at cost | 3105.9 | 3139.6 |
Accumulated depreciation and amortization | -1682.7 | -1675.1 |
Property and equipment, net | 1423.2 | 1464.5 |
Other assets: | ||
Investment in CareFusion | 897.4 | 0 |
Goodwill and other intangibles, net | 2294.7 | 2266.9 |
Other | 747.9 | 405.7 |
Total assets | 20821.5 | 25118.8 |
Current liabilities: | ||
Current portion of long-term obligations and other short-term borrowings | 12.7 | 366.2 |
Accounts payable | 10543.1 | 9041.9 |
Other accrued liabilities | 1609.9 | 1496.2 |
Liabilities from businesses held for sale and discontinued operations | 37.3 | 1370.9 |
Total current liabilities | 12,203 | 12275.2 |
Long-term obligations, less current portion and other short-term borrowings | 2099.2 | 3271.6 |
Deferred income taxes and other liabilities | 1293.2 | 847.3 |
Shareholders' equity: | ||
Preferred Shares, without par value: Authorized - 0.5 million shares, Issued - none | 0 | 0 |
Common Shares, without par value: Authorized - 755.0 million shares, Issued - 363.6 million shares and 363.7 million shares at December 31, 2009 and June 30, 2009, respectively | 2,893 | 3031.6 |
Retained earnings | 2306.5 | 5953.9 |
Common Shares in treasury, at cost, 2.3 million shares and 3.7 million shares at December 31, 2009 and June 30, 2009, respectively | -173.8 | (343) |
Accumulated other comprehensive income | 200.4 | 82.2 |
Total shareholders' equity | 5226.1 | 8724.7 |
Total liabilities and shareholders' equity | 20821.5 | 25118.8 |
1_Statement Of Financial Positi
Statement Of Financial Position Classified (Parenthetical) (USD $) | ||
Share data in Millions | Dec. 31, 2009
| Jun. 30, 2009
|
Preferred Shares, without par value | $0 | $0 |
Preferred Shares, Authorized | 0.5 | 0.5 |
Preferred Shares, Issued | 0 | 0 |
Common Shares, without par value | $0 | $0 |
Common Shares, Authorized | 755 | 755 |
Common Shares, Issued | 363.6 | 363.7 |
Common Shares in treasury, shares | 2.3 | 3.7 |
Statement Of Cash Flows Indirec
Statement Of Cash Flows Indirect (USD $) | ||
In Millions | 6 Months Ended
Dec. 31, 2009 | 6 Months Ended
Dec. 31, 2008 |
CASH FLOWS FROM OPERATING ACTIVITIES: | ||
Net earnings | 196.3 | 565.6 |
Earnings from discontinued operations | -27.9 | -224.4 |
Earnings from continuing operations | 168.4 | 341.2 |
Adjustments to reconcile earnings from continuing operations to net cash provided by operating activities: | ||
Depreciation and amortization | 125.8 | 116.1 |
Loss on extinguishment of debt | 39.9 | 0 |
Gain on sale of CareFusion common stock | (20) | 0 |
Impairments and loss on sale of assets | 24 | 10.5 |
Share based payment compensation | 42.1 | 50.2 |
Provision for bad debts | 21.4 | 21.8 |
Change in operating assets and liabilities, net of effects from acquisitions: | ||
Decrease/(increase) in trade receivables | 269.2 | -238.6 |
Increase in inventories | -1127.2 | -1820.3 |
Increase in accounts payable | 1499.2 | 1299.1 |
Other accrued liabilities and operating items, net | (259) | -286.4 |
Net cash provided by/(used in) operating activities - continuing operations | 783.8 | -506.4 |
Net cash provided by operating activities - discontinued operations | 146.8 | 717.6 |
Net cash provided by operating activities | 930.6 | 211.2 |
CASH FLOWS FROM INVESTING ACTIVITIES: | ||
Acquisition of subsidiaries, net of divestitures and cash acquired | (32) | -6.2 |
Proceeds from sale of property and equipment | 4.3 | 12.3 |
Additions to property and equipment | -79.9 | -130.5 |
Proceeds from sale of CareFusion common stock | 135 | 0 |
Net cash provided by/(used in) investing activities - continuing operations | 27.4 | -124.4 |
Net cash used in investing activities - discontinued operations | -9.9 | -51.7 |
Net cash provided by/(used in) investing activities | 17.5 | -176.1 |
CASH FLOWS FROM FINANCING ACTIVITIES: | ||
Net change in commercial paper and short-term borrowings | 0 | 101.1 |
Reduction of long-term obligations | -1484.9 | -304.5 |
Proceeds from long-term obligations, net of issuance costs | 0 | 21.4 |
Proceeds from issuance of Common Shares | 27.9 | 20.7 |
Tax (expense)/benefit from stock options | -6.1 | 2.3 |
Payment of premiums for debt extinguishment | -66.4 | 0 |
Dividends on Common Shares | -127.2 | (100) |
Purchase of treasury shares | (50) | 0 |
Net cash used in financing activities - continuing operations | -1706.7 | (259) |
Net cash provided by/(used in) financing activities - discontinued operations | 1283.8 | -2.3 |
Net cash used in financing activities | -422.9 | -261.3 |
NET INCREASE/(DECREASE) IN CASH AND EQUIVALENTS | 525.2 | -226.2 |
CASH AND EQUIVALENTS AT BEGINNING OF PERIOD | 1221.6 | 808.8 |
CASH AND EQUIVALENTS AT END OF PERIOD | 1746.8 | 582.6 |
Non-cash investing and financing transactions for: | ||
Investment in CareFusion | 863.1 | 0 |
Non-cash dividend in connection with Spin-Off | 3728.4 | $0 |
SUMMARY OF SIGNIFICANT ACCOUNTI
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | |
6 Months Ended
Dec. 31, 2009 USD / shares | |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Spin-Off of CareFusion Corporation Effective August31, 2009, Cardinal Health, Inc. (the Company) completed the distribution to its shareholders of approximately 81% of the then outstanding common stock of CareFusion Corporation (CareFusion), with the Company retaining 41.4million shares of CareFusion common stock (the Spin-Off). Under the requirements of the Private Letter Ruling obtained from the Internal Revenue Service, the Company is required to dispose of the retained shares of CareFusion common stock within five years of the Spin-Off. During the second quarter of fiscal 2010, the Company disposed of approximately 5.5million shares of CareFusion common stock. Refer to Note 6 for additional information. While Cardinal Health is a party to a separation agreement and various other agreements relating to the separation, including a transition services agreement, a tax matters agreement, an employee matters agreement, intellectual property agreements and certain other commercial agreements, the Company has determined that it has no significant continuing involvement in the operations of CareFusion. Accordingly, the net assets of CareFusion are presented separately in these condensed consolidated financial statements as assets from businesses held for sale and discontinued operations and the operating results of CareFusion are presented within discontinued operations for all periods presented through the date of the Spin-Off. The Company retained certain surgical and exam gloves, surgical drapes and apparel and fluid management businesses previously within the Clinical and Medical Products segment following the Spin-Off. For fiscal 2009, the Company had three reportable segments Healthcare Supply Chain Services, Clinical and Medical Products and All Other. Effective July1, 2009, the Company changed its reportable segments to: Pharmaceutical, Medical and CareFusion. The Pharmaceutical segment encompasses the businesses previously within the Healthcare Supply Chain Services segment that distributed pharmaceutical, radiopharmaceutical and over-the-counter healthcare products as well as the businesses previously within the All Other segment.The Medical segment encompasses the remaining businesses within the Healthcare Supply Chain Services segment as well as certain surgical and exam gloves, surgical drapes and apparel and fluid management businesses previously within the Clinical and Medical Products segment.The CareFusion segment encompasses the businesses previously within the Clinical and Medical Products segment excluding the above-referenced surgical and exam gloves, surgical drapes and apparel and fluid management businesses and includes all businesses included in the Spin-Off. In connection with the Spin-Off, the Company reorganized its reportable segments into two segments: Pharmaceutical and Medical. See Note 14 for information about these segments. Relationship between the Company and CareFusion On July22, 2009, the Company and CareFusion entered into a separation agreement to effect the Spin-Off and provide a framework for the relationship between the Company and CareFu |
RESTRUCTURING AND EMPLOYEE SEVE
RESTRUCTURING AND EMPLOYEE SEVERANCE | |
6 Months Ended
Dec. 31, 2009 USD / shares | |
RESTRUCTURING AND EMPLOYEE SEVERANCE | 2. RESTRUCTURING AND EMPLOYEE SEVERANCE Restructuring Policy The Company classifies a restructuring activity as a program whereby the Company fundamentally changes its operations such as closing facilities, moving manufacturing of a product to another location or outsourcing the production of a product. Restructuring activities may also involve substantial re-alignment of the management structure of a business unit in response to changing market conditions. A liability for a cost associated with an exit or disposal activity is recognized and measured initially at its fair value in the period in which it is incurred except for a liability for a one-time termination benefit which is recognized over its future service period. Restructuring and Employee Severance Effective July1, 2008, the Company consolidated its businesses into two primary operating and reportable segments to reduce costs and align resources with the needs of each segment. The costs incurred related to this consolidation during the three months ended December31, 2008 were $(0.9) million and for the six months ended December31, 2009 and 2008 were $1.0 million and $17.2 million, respectively. In connection with the Spin-Off, these reportable segments have since been reorganized. Refer to Notes 1 and 14 for additional information regarding the Companys current reportable segments. Also, during fiscal 2009 and the first half of fiscal 2010, the Company incurred restructuring expenses related to the Spin-Off consisting of employee-related costs, costs to evaluate and execute the transaction, costs to separate certain functions and information technology systems and other one-time transaction related costs. The costs incurred related to this restructuring during the three months ended December31, 2009 and 2008 were $6.6 million and $12.7 million, respectively, and for the six months ended December31, 2009 and 2008 were $56.1 million and $13.0 million, respectively. In addition to the restructuring programs discussed above, from time to time the Company incurs costs to implement smaller restructuring efforts for specific operations within its segments. These restructuring plans focus on various aspects of operations, including closing and consolidating certain manufacturing and distribution operations, rationalizing headcount, and aligning operations in the most strategic and cost-efficient structure. The following table summarizes activity related to the Companys restructuring and employee severance costs during the three and six months ended December31, 2009 and 2008: ThreeMonthsEnded December31, SixMonthsEnded December31, (in millions) 2009 2008 2009 2008 Employee related costs (1) $ 2.1 $ 0.1 $ 29.2 $ 21.1 Facility exit and other costs (2) 8.6 16.8 41.2 16.5 Total restructuring and employee severance $ 10.7 $ 16.9 $ 70.4 $ 37.6 (1) Employee-Related Costs.These costs primarily consist of one-time termination benefits provided to employees who have been involuntarily terminated and duplicate payroll costs durin |
IMPAIRMENTS AND LOSS ON SALE OF
IMPAIRMENTS AND LOSS ON SALE OF ASSETS | |
6 Months Ended
Dec. 31, 2009 USD / shares | |
IMPAIRMENTS AND LOSS ON SALE OF ASSETS | 3. IMPAIRMENTS AND LOSS ON SALE OF ASSETS During the six months ended December31, 2009, the Company recognized a $20.0 million impairment loss related to the write-down of SpecialtyScripts, LLC (SpecialtyScripts), a business within the Pharmaceutical segment, to expected fair value less costs to sell. See Note 4 for further information regarding the anticipated sale of SpecialtyScripts. |
DISCONTINUED OPERATIONS AND ASS
DISCONTINUED OPERATIONS AND ASSETS HELD FOR SALE | |
6 Months Ended
Dec. 31, 2009 USD / shares | |
DISCONTINUED OPERATIONS AND ASSETS HELD FOR SALE | 4. DISCONTINUED OPERATIONS AND ASSETS HELD FOR SALE CareFusion Effective August31, 2009, the Company completed the distribution to its shareholders of approximately 81% of the then outstanding common stock of CareFusion, with the Company retaining 41.4million shares of CareFusion common stock, and met the criteria for classification as discontinued operations in the Companys financial statements. During the second quarter of fiscal 2010, the Company disposed of approximately 5.5million shares of CareFusion common stock. The Companys investment in CareFusion common stock does not provide the Company the ability to influence the operating or financial policies of CareFusion and accordingly does not constitute significant continuing involvement. Furthermore, while the Company is a party to a separation agreement and various other agreements relating to the separation, including a transition services agreement, a tax matters agreement, an employee matters agreement, intellectual property agreements and certain other commercial agreements, the Company has determined that the continuing cash flows generated by these agreements, which are expected to be eliminated within 5 years, and its investment in CareFusion common stock, do not constitute significant continuing involvement in the operations of CareFusion. Accordingly, the net assets of CareFusion are presented separately as discontinued operations and the operating results are presented within discontinued operations for all periods presented through the date of the Spin-Off. The results of CareFusion included in discontinued operations for the three and six months ended December31, 2009 and 2008 are summarized as follows: ThreeMonthsEnded December31, SixMonthsEnded December31, (in millions) 2009 2008 2009 (1) 2008 Revenue $ $ 957.0 $ 592.1 $ 1,840.9 Earnings before income taxes and discontinued operations 200.2 43.7 304.1 Income tax expense (53.2 ) (23.6 ) (83.1 ) Earnings from discontinued operations 147.0 20.1 221.0 (1) Reflects the results of CareFusion through August31, 2009, the effective date of the Spin-Off. Interest expense allocated to discontinued operations for CareFusion was $16.5 million for the three months ended December31, 2008 and $12.8 million and $38.1 million for the six months ended December31, 2009 and 2008, respectively. Interest expense was allocated considering the debt issued by CareFusion in connection with the Spin-Off and the overall debt balance of the Company. In addition, a portion of the corporate costs previously allocated to CareFusion have been reclassified to the remaining two segments. There were no assets and liabilities from businesses held for sale for CareFusion at December31, 2009. At June30, 2009, the major components of assets and liabilities from businesses held for sale for CareFusion were as follows: (in millions) June30, 2009 Current assets $ 1,832.0 Property and equipment 408.5 Other assets 4,774.2 Total assets $ 7,014.7 |
GOODWILL AND OTHER INTANGIBLE A
GOODWILL AND OTHER INTANGIBLE ASSETS | |
6 Months Ended
Dec. 31, 2009 USD / shares | |
GOODWILL AND OTHER INTANGIBLE ASSETS | 5. GOODWILL AND OTHER INTANGIBLE ASSETS Goodwill The following table summarizes the changes in the carrying amount of goodwill by segment for the six months ended December31, 2009: (in millions) Pharmaceutical Medical Total Balance at June30, 2009 $ 1,232.8 $ 963.7 $ 2,196.5 Goodwill acquirednet of purchase price adjustments, foreign currency translation adjustments and other 32.5 10.4 42.9 Balance at December31, 2009 $ 1,265.3 $ 974.1 $ 2,239.4 Due to the Spin-Off and reorganization of the reporting units, goodwill was tested for impairment in the first quarter of fiscal 2010. Based on this analysis, there was no impairment. The Companys determination of estimated fair value of the reporting units is based on a combination of a discounted cash flow analysis, a multiple of earnings before interest, taxes, depreciation and amortization (EBITDA) and, if available, a review of the price/earnings ratio for publicly traded companies similar in nature, scope and size of the respective reporting units. The discount rates used for impairment testing are based on the risk-free rate plus an adjustment for risk factors. The EBITDA multiples used for impairment testing are judgmentally selected based on factors such as the nature, scope and size of the applicable reporting unit. The use of alternative estimates, peer groups or changes in the industry, or adjusting the discount rate, EBITDA multiples or price earnings ratios used could affect the estimated fair value of the reporting units and potentially result in goodwill impairment. The allocations of the purchase price related to certain small acquisitions are not yet finalized and are subject to adjustment as the Company completes the valuation analyses for these acquisitions. Intangible Assets Intangible assets with definite lives are amortized over their useful lives which range from three to twenty years. The detail of other intangible assets by class as of June30, 2009 and December31, 2009 is as follows: (in millions) Gross Intangible Accumulated Amortization Net Intangible June30, 2009 Unamortized intangibles: Trademarks and patents $ 11.4 $ $ 11.4 Total unamortized intangibles 11.4 11.4 Amortized intangibles: Trademarks and patents 30.2 12.9 17.3 Non-compete agreements 3.9 2.5 1.4 Customer relationships 46.6 35.1 11.5 Other 66.2 37.4 28.8 Total amortized intangibles 146.9 87.9 59.0 Total intangibles $ 158.3 $ 87.9 $ 70.4 December31, 2009 Unamortized intangibles: Trademarks and patents $ 9.2 $ $ 9.2 Total unamortized intangibles 9.2 9.2 Amortized intangibles: Trademarks and patents 22.1 13.1 9.0 Non-compete agreements 4.1 2.7 1.4 Customer relationships |
INVESTMENT IN CAREFUSION
INVESTMENT IN CAREFUSION | |
6 Months Ended
Dec. 31, 2009 USD / shares | |
INVESTMENT IN CAREFUSION | 6. INVESTMENT IN CAREFUSION The following table provides a summary of the Companys available-for-sale securities as of December31, 2009: Available-for-Sale Securities (in millions) Cost (2) Gross Unrealized Gains Gross Unrealized Losses Estimated Fair Value Equity securities (1) $ 748.2 $ 149.2 $ $ 897.4 Total $ 748.2 $ 149.2 $ $ 897.4 (1) Equity securities consist of the Companys ownership of approximately 35.9million shares of CareFusion common stock retained in connection with the Spin-Off. These securities are stated at fair value, with unrealized gains and losses reported in other comprehensive income. Realized gains and losses, and declines in fair value deemed to be other-than-temporary are recognized in net earnings immediately. During the three months ended December31, 2009, the Company disposed of approximately 5.5million shares of CareFusion common stock resulting in proceeds of approximately $135.0 million and a pre-tax realized gain of approximately $20.0 million. The net adjustment to unrealized holding gains on CareFusion common stock included in other comprehensive income totaled $115.2 million during the same period. (2) Represents the Companys cost investment in the net book value of CareFusions assets immediately following the Spin-Off adjusted for the sale of securities during the three months ended December31, 2009. |
LONG-TERM OBLIGATIONS AND OTHER
LONG-TERM OBLIGATIONS AND OTHER SHORT-TERM BORROWINGS | |
6 Months Ended
Dec. 31, 2009 USD / shares | |
LONG-TERM OBLIGATIONS AND OTHER SHORT-TERM BORROWINGS | 7. LONG-TERM OBLIGATIONS AND OTHER SHORT-TERM BORROWINGS On September24, 2009, the Company completed a debt tender announced on August27, 2009 for an aggregate purchase price, including an early tender premium but excluding accrued interest, fees and expenses, of up to $1.2 billion of the following series of debt securities (listed in order of acceptance priority): (i)7.80% Debentures due October15, 2016 of Allegiance Corporation; (ii)6.75% Notes due February15, 2011 of the Company; (iii)6.00% Notes due June15, 2017 of the Company; (iv)7.00% Debentures due October15, 2026 of Allegiance Corporation; (v)5.85% Notes due December15, 2017 of the Company; (vi)5.80% Notes due October15, 2016 of the Company; (vii)5.65% Notes due June15, 2012 of the Company; (viii)5.50% Notes due June15, 2013 of the Company; and (ix)4.00% Notes due June15, 2015 of the Company. The Company purchased more than $1.1 billion pursuant to the offer using the order of priority set forth above. In connection with the debt tender, the Company incurred a pre-tax loss for the early extinguishment of debt of approximately $39.9 million, which included an early tender premium of $66.4 million, the write-off of $5.3 million of unamortized debt issuance costs, and an offsetting $31.8 million fair value adjustment to the respective debt related to previously terminated interest rate swaps. Long-term obligations and other short-term borrowings consist of the following as of December31, 2009 and June30, 2009: (in millions) December31, 2009 June30, 2009 4.00%Notes due 2015 $ 520.7 $ 523.8 5.50% Notes due 2013 299.2 300.0 5.65%Notes due 2012 216.2 317.1 5.80%Notes due 2016 309.8 526.4 5.85%Notes due 2017 158.0 500.0 6.00%Notes due 2017 214.9 350.4 6.75%Notes due 2011 217.9 494.6 7.80%Debentures due 2016 44.1 75.7 7.00%Debentures due 2026 124.5 192.0 Floating Rate Notes due 2009 350.0 Other obligations 6.6 7.8 Total 2,111.9 3,637.8 Less: current portion and other short-term borrowings 12.7 366.2 Long-term obligations, less current portion and other short-term borrowings $ 2,099.2 $ 3,271.6 |
INCOME TAXES
INCOME TAXES | |
6 Months Ended
Dec. 31, 2009 USD / shares | |
INCOME TAXES | 8. INCOME TAXES Effective July1, 2007, the Company adopted new accounting guidance regarding the accounting for uncertainty in income taxes recognized in the financial statements, resulting in a $139.3 million reduction of retained earnings. This accounting guidance provides that a tax benefit from an uncertain tax position may be recognized when it is more likely than not that the position will be sustained upon examination, including resolutions of any related appeals or litigation processes, based on the technical merits. The amount recognized is measured as the largest amount of tax benefit that is greater than 50% likely of being realized upon settlement. This interpretation also provides guidance on measurement, derecognition, classification, interest and penalties, accounting in interim periods, disclosure and transition. The balance of unrecognized tax benefits and the amount of interest and penalties were as follows as of December31, 2009 and June30, 2009: (in millions) December31, 2009 June30, 2009 Unrecognized tax benefits (1)(2)(3) $ 698.5 $ 848.8 Portion that, if recognized, would reduce tax expense and effective tax rate(2) 333.8 610.9 Accrued penalties and interest (2)(3)(4) 222.3 247.0 (1) The Company includes the full amount of unrecognized tax benefits in deferred income taxes and other liabilities in the condensed consolidated balance sheets. (2) Due to the anticipated repatriation of certain foreign earnings, taxes associated with a special purpose entity transaction no longer represent uncertain tax benefits and have been classified at December31, 2009 as deferred tax liabilities. (3) The December31, 2009 balance includes unrecognized tax benefits related to CareFusion. In accordance with indemnification provisions of the tax matters agreement entered into between the Company and CareFusion, the Company is entitled to reimbursement from CareFusion. The Company has recorded a long term receivable of approximately $214.5 million from CareFusion for these amounts (net of any tax refund claims). (4) Balances are gross amounts before any tax benefits and are included in deferred income taxes and other liabilities in the condensed consolidated balance sheets. Upon completion of the Spin-Off, the Company recorded a tax charge of approximately $171.9 million related to the anticipated repatriation of a portion of cash currently loaned to the Companys entities within the United States from its international subsidiaries. This charge is included within earnings from continuing operations for the six months ended December31, 2009. The Company files income tax returns in the U.S. federal jurisdiction, various U.S. state jurisdictions and various foreign jurisdictions. With few exceptions, the Company is subject to audit by taxing authorities for fiscal years ended June30, 2001 through the current fiscal year. The Internal Revenue Service (IRS) currently has ongoing audits of fiscal years 2001 through 2007. During the three months ended December31, 2007, the Company was notified that the IRS transferred jurisdiction over fiscal y |
CONTINGENT LIABILITIES
CONTINGENT LIABILITIES | |
6 Months Ended
Dec. 31, 2009 USD / shares | |
CONTINGENT LIABILITIES | 9. CONTINGENT LIABILITIES Legal Proceedings In addition to commitments and obligations in the ordinary course of business, the Company is subject to various claims, other pending and potential legal actions for damages, investigations relating to governmental laws and regulations and other matters arising out of the normal conduct of its business. When accruing for contingencies related to litigation, the Company considers the degree of probability and range of possible loss. An estimated loss contingency is accrued in the Companys consolidated financial statements if it is probable that a liability has been incurred and the amount of the loss can be reasonably estimated. Because litigation is inherently unpredictable and unfavorable resolutions could occur, assessing contingencies is highly subjective and requires judgments about future events. The Company regularly reviews contingencies to determine the adequacy of the accruals and related disclosures. The amount of ultimate loss may differ from these estimates. It is possible that cash flows or results of operations could be materially affected in any particular period by the unfavorable resolution of one or more of these contingencies. The Company recognizes income from the favorable outcome of legal settlements, judgments or other resolution of legal and regulatory matters when the associated cash or assets are received. Estimated loss contingencies related to litigation and regulatory matters and income from favorable resolution of legal and regulatory matters are recognized in litigation (credits)/charges, net in the Companys condensed consolidated statements of earnings. Insurance Proceeds In the three months ending December31, 2009, the Company recognized $27.2 million of income related to insurance proceeds released from escrow following the resolution of securities and derivative litigation against certain of the Companys directors and officers. This amount is comprised of $25.7 million received from directors and officers insurance policies recognized in litigation (credits)/charges, net and $1.5 million of accrued interest income recognized in interest expense, net.For further information regarding this matter, see the Companys Annual Report on Form 10-K for the fiscal year ended June30, 2007. Income Taxes See Note 8 for discussion of contingencies related to the Companys income taxes. Other Matters The Company also becomes involved from time-to-time in litigation and regulatory matters incidental to its business, including, but not limited to, personal injury claims, employment matters, commercial disputes, intellectual property matters, inclusion as a potentially responsible party for environmental clean-up costs, and litigation in connection with acquisitions and divestitures. The Company intends to vigorously defend itself against such litigation and does not currently believe that the outcome of any such litigation will have a material adverse effect on the Companys consolidated financial statements. From time to time, the Company receives subpoenas or requests for information from various government agencies relating to the business, acco |
GUARANTEES
GUARANTEES | |
6 Months Ended
Dec. 31, 2009 USD / shares | |
GUARANTEES | 10. GUARANTEES In the ordinary course of business, the Company, from time to time, agrees to indemnify certain other parties under agreements with the Company, including under acquisition and disposition agreements, customer agreements and intellectual property licensing agreements. Such indemnification obligations vary in scope and, when defined, in duration. In many cases, a maximum obligation is not explicitly stated and therefore the overall maximum amount of the liability under such indemnification obligations cannot be reasonably estimated. Where appropriate, such indemnification obligations are recorded as a liability. Historically, the Company has not, individually or in the aggregate, made payments under these indemnification obligations in any material amounts. In certain circumstances, the Company believes that its existing insurance arrangements, subject to the general deduction and exclusion provisions, would cover portions of the liability that could arise from any of these indemnification obligations. In addition, the Company believes that the likelihood of a material liability being triggered under these indemnification obligations is not significant. In the ordinary course of business, the Company, from time to time, enters into agreements that obligate the Company to make fixed payments upon the occurrence of certain events. Such obligations primarily relate to obligations arising under acquisition transactions, where the Company has agreed to make payments based upon the achievement of certain financial performance measures by the acquired business. Generally, the obligation is capped at an explicit amount. The Companys aggregate exposure for these obligations, assuming the achievement of all financial performance measures, is not material. In the ordinary course of business, the Company, from time to time, extends loans to its customers which are subsequently sold to a bank. The bank services and administers these loans as well as any new loans the Company may direct. In order for the bank to purchase such loans, it requires the absolute and unconditional obligation of the Company to repurchase such loans upon the occurrence of certain events described in the agreement including, but not limited to, borrower payment default that exceeds 90 days, insolvency and bankruptcy. At December31, 2009 and June30, 2009, notes in the program subject to the guaranty of the Company totaled $39.6 million and $39.9 million, respectively. These loans are reported in the Companys condensed consolidated balance sheet. |
FAIR VALUE MEASUREMENTS
FAIR VALUE MEASUREMENTS | |
6 Months Ended
Dec. 31, 2009 USD / shares | |
FAIR VALUE MEASUREMENTS | 11. FAIR VALUE MEASUREMENTS In September 2006, the FASB issued new accounting guidance on fair value measurements. The guidance defines fair value, establishes a framework for measuring fair value in GAAP and expands disclosures about fair value measurements. Additionally, this guidance established a three-level fair value hierarchy that prioritizes the inputs used to measure fair value. This hierarchy requires entities to maximize the use of observable inputs and minimize the use of unobservable inputs. The three levels of inputs used to measure fair values are as follows: Level1 Observable prices in active markets for identical assets and liabilities. Level2 Observable inputs other than quoted prices in active markets for identical assets and liabilities. Level3 Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets and liabilities. In February 2008, the FASB issued additional guidance permitting a one-year deferral with regard to nonfinancial assets and nonfinancial liabilities that are not recognized or disclosed at fair value in the financial statements on a recurring basis (at least annually).The Company adopted this new accounting guidance on July1, 2008 with respect to all financial assets and liabilities and on July1, 2009 with respect to all non-financial assets and liabilities. The adoption of this guidance did not have a material impact on the Companys financial position or results of operations in either period. Recurring Fair Value Measurements The following table presents the fair values for those assets and (liabilities) measured on a recurring basis as of December31, 2009: Fair Value Measurements (in millions) Level1 Level2 Level3 Total Cash Equivalents (1) $ 987.5 $ $ $ 987.5 Equity Securities (2) 897.4 897.4 Forward Contracts (3) 82.0 82.0 Other Investments (4) 73.2 73.2 Total $ 1,958.1 $ 82.0 $ $ 2,040.1 (1) Cash equivalents are comprised of highly liquid investments purchased with a maturity of three months or less. The carrying value of these cash equivalents approximates fair value due to their short-term maturities. (2) Equity securities consist of the Companys investment in CareFusion common stock. The fair value of these securities is determined using the quoted market price of the security. (3) The fair value of the Companys foreign currency forward contracts and commodity contracts is determined based on the present value of expected future cash flows considering the risks involved, including nonperformance risk, and using discount rates appropriate for the respective maturities. (4) The other investments balance includes investments in mutual funds, which are used to offset fluctuations in the Companys deferred compensation liabilities. The fair value of these investments is determined using quoted market prices. Non-Recurring Fair Value Measurements The following table presents the fair values for tho |
EARNINGS PER SHARE AND SHAREHOL
EARNINGS PER SHARE AND SHAREHOLDERS' EQUITY | |
6 Months Ended
Dec. 31, 2009 USD / shares | |
EARNINGS PER SHARE AND SHAREHOLDERS' EQUITY | 12. EARNINGS PER SHARE AND SHAREHOLDERS EQUITY Earnings per Share Basic earnings per Common Share (Basic EPS) is computed by dividing net earnings (the numerator) by the weighted average number of Common Shares outstanding during each period (the denominator). Diluted earnings per Common Share (Diluted EPS) is similar to the computation for Basic EPS, except that the denominator is increased by the dilutive effect of vested and unvested stock options, restricted shares and restricted share units computed using the treasury stock method. The following table reconciles the number of Common Shares used to compute Basic EPS and Diluted EPS for the three and six months ended December31, 2009 and 2008: ThreeMonthsEnded December31, SixMonthsEnded December31, (in millions) 2009 2008 2009 2008 Weighted-average Common Shares basic 359.0 357.3 359.1 357.0 Effect of dilutive securities: Employee stock options, restricted shares and restricted share units 2.0 3.0 2.0 4.2 Weighted-average Common Shares diluted 361.0 360.3 361.1 361.2 The potentially dilutive securities that were antidilutive for the three months ended December31, 2009 and 2008 were 24.7million shares and 32.6million shares, respectively, and for the six months ended December31, 2009 and 2008 were 23.0million shares and 24.7million shares, respectively. The total number of Common Shares issued less the Common Shares held in treasury is used to determine the Common Shares outstanding. Shareholders Equity During the three months ended December31, 2009, the Company repurchased approximately $50 million of its Common Shares under its existing $500 million share repurchase program announced on August5, 2009. This repurchase authorization expires on August31, 2012. At December31, 2009, approximately $450 million remained from the $500 million repurchase authorization. The Company expects to use this repurchase program to at least offset equity plan issuances. In connection with the Spin-Off on August31, 2009, the Company issued a non-cash dividend of approximately $3.7 billion to its shareholders through the pro-rata distribution of approximately 81% of the CareFusion Corporation common shares. |
COMPREHENSIVE INCOME
COMPREHENSIVE INCOME | |
6 Months Ended
Dec. 31, 2009 USD / shares | |
COMPREHENSIVE INCOME | 13. COMPREHENSIVE INCOME The following is a summary of the Companys comprehensive income for the three and six months ended December31, 2009 and 2008: ThreeMonthsEnded December31, SixMonthsEnded December31, (in millions) 2009 2008 2009 2008 Net earnings $ 234.5 $ 316.5 $ 196.3 $ 565.6 Foreign currency translation adjustments 3.6 (85.3 ) (37.8 ) (168.6 ) Net unrealized gain/(loss) on derivative instruments 2.4 (9.8 ) 15.0 (0.9 ) Net unrealized gain on investment in CareFusion, net of tax 117.5 141.0 Total comprehensive income $ 358.0 $ 221.4 $ 314.5 $ 396.1 |
SEGMENT INFORMATION
SEGMENT INFORMATION | |
6 Months Ended
Dec. 31, 2009 USD / shares | |
SEGMENT INFORMATION | 14. SEGMENT INFORMATION The Companys operations are principally managed on a products and services basis. In connection with the Spin-Off, the Company reorganized its businesses into two reportable segments - Pharmaceutical and Medical. The factors for determining the reportable segments include the manner in which management evaluates the performance of the Company combined with the nature of the individual business activities. The Pharmaceutical segment distributes pharmaceutical products, over-the-counter healthcare products and consumer health products and provides support services to retail customers, hospitals and alternate care providers in the United States and Puerto Rico. It also provides services to branded pharmaceutical manufacturers and operates a pharmaceutical repackaging and distribution program. In addition, this segment operates centralized nuclear (radiopharmaceutical) pharmacies, provides third-party logistics support services and distributes therapeutic plasma to hospitals, clinics and other providers located in the United States. It also franchises apothecary-style retail pharmacies through its Medicine Shoppe International, Inc. and Medicap Pharmacies Incorporated franchise systems. Finally, it provides pharmacy management services to hospitals and other healthcare facilities. The Medical segment develops, manufactures and distributes medical and surgical products including sterile and non-sterile procedure kits to hospitals, surgery centers, laboratories, physician offices and other healthcare providers in the United States, Canada and Puerto Rico. The medical and surgical products manufactured by the business, including single-use surgical drapes, gowns and apparel, exam and surgical gloves and fluid suction and collection systems, are also sold in various regions of the world outside of the United States, including countries in North America, Europe, and Asia. The following table includes revenue for each reportable segment and reconciling items necessary to agree to amounts reported in the condensed consolidated financial statements: Three Months Ended December31, Six Months Ended December31, (in millions) 2009 2008 2009 2008 Segment revenue: Pharmaceutical (1) $ 22,694.7 $ 22,078.7 $ 45,257.0 $ 43,482.8 Medical (2) 2,232.4 2,057.3 4,469.4 4,094.0 Total segment revenue 24,927.1 24,136.0 49,726.4 47,576.8 Corporate (3) (7.4 ) (18.2 ) (26.0 ) (21.9 ) Total consolidated revenue $ 24,919.7 $ 24,117.8 $ 49,700.4 $ 47,554.9 (1) The Pharmaceutical segments revenue is derived from the distribution of pharmaceutical, radiopharmaceutical and over-the-counter healthcare products. (2) The Medical segments revenue is derived from the manufacturing and distribution of medical, surgical and laboratory products and medical procedure kits. (3) Corporate revenue consists of the elimination of inter-segment reve |
EMPLOYEE EQUITY PLANS
EMPLOYEE EQUITY PLANS | |
6 Months Ended
Dec. 31, 2009 USD / shares | |
EMPLOYEE EQUITY PLANS | 15. EMPLOYEE EQUITY PLANS Employee Equity Plans The Company maintains several stock incentive plans (collectively, the Plans) for the benefit of certain of its officers, directors and employees. Employee options granted under the Plans during fiscal 2008 through fiscal 2010 generally vest in equal annual installments over three years and are exercisable for periods up to seven years from the date of grant at a price equal to the fair market value of the Common Shares underlying the option at the date of grant. Employee options granted under the Plans during fiscal 2007 generally vest in equal annual installments over four years and are exercisable for periods up to seven years from the date of grant at a price equal to the fair market value of the Common Shares underlying the option at the date of grant. Employee restricted shares and restricted share units granted under the Plans during fiscal 2007 through fiscal 2010 generally vest in equal installments over three years and entitle holders to dividends or cash dividend equivalents. Restricted shares and restricted share units that were awarded after August1, 2006 accrue dividends or cash dividend equivalents that are payable upon vesting of the awards. The compensation expense recognized for all share-based payment awards is net of estimated forfeitures and is recognized using the straight-line method over the applicable service period. The Company classifies share-based payment compensation within SGA expenses to correspond with the same line item as the majority of the cash compensation paid to employees. The following table illustrates the impact of share-based payment compensation on reported amounts for the three and six months ended December31, 2009 and 2008: ThreeMonthsEnded December31, Six Months Ended December31, (in millions, except per share amounts) 2009 2008 2009 2008 Operating earnings (1)(2) $ (20.1 ) $ (29.2 ) $ (42.1 ) $ (50.2 ) Earnings from continuing operations $ (12.8 ) $ (19.6 ) $ (27.0 ) $ (33.8 ) Net earnings(3) (4) $ (12.8 ) $ (23.1 ) $ (29.3 ) $ (39.4 ) Net basic earnings per Common Share $ (0.04 ) $ (0.06 ) $ (0.08 ) $ (0.11 ) Net diluted earnings per Common Share $ (0.04 ) $ (0.06 ) $ (0.08 ) $ (0.11 ) (1) The total share-based payment compensation expense for the three months ended December31, 2009 and 2008 includes gross restricted share and restricted share unit expense of approximately $11.5 million and $17.6 million, respectively, gross employee stock option expense of approximately $8.2 million and $10.6 million, respectively, gross employee stock purchase plan expense of approximately $0.0 million and $2.7 million, respectively and gross stock appreciation right (income)/expense of $0.4 million and $(1.7) million, respectively. (2) The total share-based payment compensation expense for the six months ended December31, 2009 and 2008 includes gross restricted share and restricted share unit expense of approximately $22.8 million and $29.1 million, respectively, gross empl |
Document Information
Document Information | |
6 Months Ended
Dec. 31, 2009 USD / shares | |
Document Type | 10-Q |
Amendment Flag | false |
Document Period End Date | 2009-12-31 |
Entity Information
Entity Information (USD $) | ||
6 Months Ended
Dec. 31, 2009 | Feb. 02, 2010
| |
Trading Symbol | CAH | |
Entity Registrant Name | CARDINAL HEALTH INC | |
Entity Central Index Key | 0000721371 | |
Current Fiscal Year End Date | --06-30 | |
Entity Filer Category | Large Accelerated Filer | |
Entity Common Stock, Shares Outstanding | 361,459,464 |