Cardinal Health 2009 Annual Report Download - page 52

CareFusion manufactures medication infusion and dispensing products, respiratory equipment, surgical
instruments and leading technologies and services that help hospitals prevent medication errors, reduce hospital-
acquired infections and manage medications and supplies more efficiently. CareFusion products provide
protection against medication errors using Alaris®infusion devices and Pyxis®medication dispensing systems.
Infection prevention products include Convertors®brand surgical gowns, Esteem®brand medical gloves,
Chloraprep®brand preoperative skin preparation products, as well as electronic infection surveillance through
MedMined®services. CareFusion also leads in the respiratory care category through its AVEA®respirators and
other leading ventilation brands.
On July 10, 2009, the Company’s Board of Directors approved the distribution to its shareholders of 80.1%
or more of the shares of CareFusion common stock on the basis of 0.5 shares of CareFusion common stock for
each Common Share of the Company. The distribution will be made after the close of trading on August 31, 2009
to the Company’s shareholders of record as of 5 p.m. Eastern Daylight Time on August 25, 2009. Following the
Spin-Off, the Company will retain no more than 19.9% of the outstanding shares of CareFusion common stock.
The Company is required to dispose of the retained shares of CareFusion common stock within five years of the
distribution.
The distribution is subject to a number of conditions, including, among others:
• the private letter ruling that the Company received from the IRS not being revoked or modified in any
material respect;
• the receipt of opinions from counsel to the Company to the effect that the contribution and distribution
will qualify as a transaction that is described in Sections 355(a) and 368(a)(1)(D) of the Internal
Revenue Code of 1986, as amended (the “Code”);
• no rating agency action that is likely to result in either the Company or CareFusion being downgraded
below investment grade; and
• the making of a cash distribution from CareFusion to the Company prior to the distribution.
The Company cannot assure you that any or all of these conditions will be met.
The Company currently anticipates expenditures associated with the Spin-Off to be approximately $261
million on a pre-tax basis, of which approximately $113 million were incurred in fiscal 2009, with the remainder
expected to be incurred in fiscal 2010 and beyond. These expenditures primarily consist of functional area
separation costs, stand-up costs, employee-related costs and other one-time transaction related costs.
Approximately $222 million of these costs are expected to result in cash expenditures, of which approximately
$96 million were incurred during fiscal 2009. The Company expects to fund the remainder of the costs through
its current sources of liquidity including cash on hand. The Company expects the activities in connection with the
Spin-Off to be completed by fiscal 2011. These estimated costs do not include costs expected to be incurred by
CareFusion following the Spin-Off.
Upon completion of the Spin-Off, the Company also expects a tax charge of approximately $150 million
related to the anticipated repatriation of a portion of cash currently loaned to the Company’s entities within the
United States.
Reasons for the Spin-Off
The Company’s Board of Directors believes that separating the clinical and medical products businesses
from the remainder of the Company is in the best interests of the Company and its shareholders because such
separation is expected to:
• improve strategic planning, increase management focus and streamline decision-making by providing
the flexibility to implement the unique strategic plans of each company and to respond more effectively
to different customer needs of each company and the changing economic environment;
30