Cardinal Health 2009 Annual Report Download - page 44

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•Risks of Not Obtaining Benefits from the Spin-Off. The Company and CareFusion may not achieve
some or all of the expected benefits of the Spin-Off, or may not achieve them in a timely fashion.
•Risks Relating to Less Diversification. If the Spin-Off is completed, the Company’s operational and
financial profile will change as a result of the separation of CareFusion from the Company’s other
businesses. As a result, the Company’s diversification of revenue sources will diminish, and it is
possible that the Company’s results of operations, cash flows, working capital and financing
requirements may be subject to increased volatility. The Spin-Off could also be a factor causing or
contributing to a determination by one or more of the rating agencies to lower the credit rating of the
Company. Although the Spin-Off will not trigger an acceleration of any of the Company’s
indebtedness, a ratings downgrade by any of the ratings agencies may eliminate or significantly
diminish the Company’s ability to gain access to the commercial paper market, resulting in the need for
the Company to use alternative sources of credit at rates that may be higher than would otherwise be
available to the Company.
•Risks Relating to Taxes. In connection with the Spin-Off, the Company received a private letter ruling
from the IRS to the effect that, among other things, the contribution by the Company of the assets of
the clinical and medical products businesses to CareFusion and the distribution will qualify as a
transaction that is tax-free for U.S. federal income tax purposes under Sections 355 and 368(a)(1)(D) of
the Code. In addition, it is a condition to the distribution that the Company receive opinions of tax
counsel to the effect that the Spin-Off will qualify as a transaction that is described in Sections 355(a)
and 368(a)(1)(D) of the Code. The ruling relies on, and the opinions will rely on, certain facts,
assumptions, representations and undertakings from the Company and CareFusion regarding the past
and future conduct of the companies’ respective businesses and other matters. If any of these facts,
assumptions, representations or undertakings are incorrect or not otherwise satisfied, the Company and
its shareholders may not be able to rely on the ruling or the opinions of tax counsel and could be
subject to significant tax liabilities. Notwithstanding the private letter ruling and opinions of tax
counsel, the IRS could determine on audit that the Spin-Off is taxable if it determines that any of these
facts, assumptions, representations or undertakings are not correct or have been violated or if it
disagrees with the conclusions in the opinions that are not covered by the private letter ruling, or for
other reasons, including as a result of certain significant changes in the stock ownership of the
Company or CareFusion after the Spin-Off. If the Spin-Off is determined to be taxable for U.S. federal
income tax purposes, the Company and its shareholders that are subject to U.S. federal income tax
could incur significant U.S. federal income tax liabilities.
The Company’s minority investment in CareFusion is subject to certain risks and uncertainties and the
Company may not be able to capture the full benefits from this investment.
After the Spin-Off, the Company expects to retain no more than 19.9% of the outstanding shares of
CareFusion common stock. As with any investment in a publicly traded company, the Company’s investment in
CareFusion will be subject to certain risks and uncertainties relating to CareFusion’s business and ownership of
CareFusion common stock, which risks are disclosed in detail in CareFusion’s filings with the SEC. In addition,
in connection with the Spin-Off, the Company agreed to vote all of the shares of CareFusion common stock that
it retains in proportion to the votes cast by CareFusion’s other stockholders, and in connection with that
agreement, the Company granted CareFusion a proxy to vote the shares of CareFusion common stock held by the
Company accordingly. As a result, after the Spin-Off, the Company may be required to vote its shares of
CareFusion common stock in a manner that is contrary to the manner in which the Company would otherwise
have voted such shares. In addition, even though the Company will be CareFusion’s largest shareholder
immediately after the Spin-Off, the Company will not have any representation on CareFusion’s Board of
Directors.
Pursuant to the private letter ruling received from the IRS in connection with the Spin-Off, the Company
will be required to dispose of its retained shares of CareFusion common stock as soon as practicable after the
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