Cardinal Health 2009 Annual Report Download - page 73

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During fiscal 2001, the Company entered into an agreement to periodically sell trade receivables to a special
purpose accounts receivable and financing entity (the “Accounts Receivable and Financing Entity”), which was
exclusively engaged in purchasing trade receivables from, and making loans to, the Company. The Accounts
Receivable and Financing Entity, which was consolidated by the Company as it was the primary beneficiary of
the variable interest entity, issued preferred variable debt securities to parties not affiliated with the Company. On
October 3, 2008, the Company repaid the remaining balance of $149 million for the preferred debt securities and
the agreement was terminated.
See Notes 4, 9 and 19 of “Notes to Consolidated Financial Statements” for more information about the
Company’s capital resources.
The Company currently believes that, based upon existing cash, operating cash flows, available capital
resources (as discussed above) and other available market transactions, it has adequate capital resources at its
disposal to fund currently anticipated capital expenditures, business growth and expansion, working capital
needs, contractual obligations and current and projected debt service requirements, including those related to
business combinations.
From time to time, the Company considers and engages in acquisition transactions in order to expand its
role as a leading provider of products and services that improve the safety and productivity of healthcare. The
Company evaluates possible candidates for acquisition and considers opportunities to expand its role as a
provider of products and services to the healthcare industry through all its reportable segments. If additional
transactions are entered into or consummated, the Company may need to enter into funding arrangements for
such acquisitions.
See “Impact of the Spin-Off to the Company’s Capital Structure” above for more information about the
Company’s capital structure after the Spin-Off.
Debt Ratings/Covenants
The Company’s senior debt credit ratings from Standard & Poor’s Rating Services (“S&P”), Moody’s
Investors Service (“Moody’s”) and Fitch Ratings (“Fitch”) are BBB+, Baa3 and BBB, respectively, and the short-
term ratings are A-2, P-3 and F2, respectively. The S&P and Fitch ratings outlooks are “stable.” The Moody’s
outlook is “negative.” The short-term ratings downgrade by Moody’s, triggered by the Spin-Off, may diminish the
Company’s ability to gain access to the commercial paper market, but the Company believes that it will be able to,
in such event, utilize alternative sources of credit that are available to the Company.
Prior to the Spin-Off, the Company’s various borrowing facilities and long-term debt are free of any
financial covenants other than minimum net worth which cannot fall below $5.0 billion at any time. As of
June 30, 2009, the Company was in compliance with this covenant.
On April 16, 2009, in connection with the Spin-Off, the Company amended its $1.5 billion revolving credit
facility to, among other things, replace a minimum net worth covenant with covenants that require the Company
to maintain a consolidated interest coverage ratio as of the end of any fiscal quarter of at least 4-to-1 and to
maintain a consolidated leverage ratio of no more than 3.25-to-1. The new covenants will become effective when
the Company consummates the Spin-Off, including payment of the contemplated cash distribution from
CareFusion to the Company prior to the Spin-Off.
On May 1, 2009, the Company amended its committed sales facility program to replace a minimum net
worth covenant in the Performance Guaranty with covenants that require the Company to maintain a consolidated
interest coverage ratio as of the end of any fiscal quarter of at least 4-to-1 and to maintain a consolidated leverage
ratio of no more than 3.25-to-1. The new covenants will not become effective until the date on which the new
financial covenants become effective for the Company’s $1.5 billion revolving credit facility as described above.
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