Cardinal Health 2011 Annual Report Download

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ENVISIONING
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Table of contents

  • Page 1
    ENViSiONiNG NEXT rEaliZiNG NOW ï™... Annual Report

  • Page 2
    AS THE BUSINESS BEHIND HEALTHCARE, we have a unique vantage point from which to drive efficiency through the system. We have a vision of what the future of healthcare can be, and we're acting on it - focusing on tomorrow while making bold new strides today. We are equipping healthcare providers with...

  • Page 3
    NEXT + NOW We are focusing on tomorrow while making bold new strides today. 1

  • Page 4
    .... They included: • Rebalancing our customer mix and driving generics by expanding our footprint in retail independent pharmacy; • Establishing our presence in the fast-growing specialty pharmaceutical segment; • Growing our position in ambulatory care settings; and • Exploring select...

  • Page 5
    ... specialty pharmaceutical services; • Invested in the sales force and customer-facing tools in our ambulatory care business; • Acquired Kinray, which dramatically increased our footprint in independent pharmacy and will accelerate the growth of our generic franchise; and • Established a new...

  • Page 6
    ... of commodity price increases. With the acquisition of P4 Healthcare, we firmly established our presence in oncology and specialty pharmaceutical services. We continued to build out our capabilities in clinical pathways management, giving us greater strength with new sets of customers and partners...

  • Page 7
    ... impacts our preferred products business. We continue to build out product categories with Cardinal Health-branded products, as well as select national brands. And we feel very good about our expanded global sourcing capabilities, our geographic presence, and the regulatory capabilities...

  • Page 8
    ..., and pharmaceutical manufacturers, with the goal to improve access to efficient, high quality care. We have the model, technology, expertise and resources to support each of these stakeholders. The timing is right for this important focus on integrated care, shared accountability and data driven...

  • Page 9
    ... number of Americans who still struggle to access affordable, quality care is creating a perfect storm. The pressure to address these issues - while managing the impact on our economy - will force us to explore new ways to deliver healthcare. We believe that the market will need to innovate in order...

  • Page 10
    ... the acquisition of Kinray, Inc., a leading pharmaceutical distributor serving the New York City metropolitan area, and organic growth in our customer base, we expanded the number of independent retail pharmacies we serve in the United States by about 50 percent. Providing value-added services By...

  • Page 11
    ..., the role of pharmacy will continue to be important. At Cardinal Health, we are focused on helping our retail pharmacy customers streamline their operations and deliver new healthcare services, so that they can concentrate on patient care and reinforce their role as trusted community resources. 9

  • Page 12
    ... patient outcomes and consistency of care are increasingly scrutinized, an even greater focus on quality is imperative. As the healthcare landscape continues to evolve, addressing both quality and cost-effectiveness becomes more and more difficult to achieve. Cardinal Health is making it easier for...

  • Page 13
    ... surgical supplies they use every day. Our position as a leading manufacturer and distributor enables us to uniquely manufacture and source products that are clinically effective, cost-efficient and set the standard for performance and innovation. The Cardinal Health brand medical/surgical product...

  • Page 14
    ..., or PET, imaging agents. The Center is also developing innovations that improve the manufacturing and dispensing process for these imaging agents. Cardinal Health is a leading manufacturer of surgical gloves. SUPPORTING PROVIDERS Cardinal Health has the largest network of nuclear pharmacies in...

  • Page 15
    WHAT'S NEXT Providers everywhere are working to better manage the coordination of care across the healthcare continuum. With our breadth of services and unique connecting points, Cardinal Health is well-positioned to help them forge strong links across the chain of care. 13

  • Page 16
    ... help address. At Cardinal Health, we apply our deep understanding of healthcare, our supply chain expertise and the skills of our people to help eliminate unnecessary healthcare costs, increase efficiencies and improve quality. In short, we make healthcare more cost-effective so our customers can...

  • Page 17
    ... and put the products directly where they need to be - in the hands of clinicians at the point of care. Helping customers manage cost From product sourcing to order management, we are constantly working to drive costs out of the supply chain. And now, especially, Cardinal Health is focused on...

  • Page 18
    ... word about the dangers of prescription drug abuse, the Cardinal Health Foundation has teamed up with The Ohio State University College of Pharmacy to create the GenerationRxâ„¢ outreach program, a free, comprehensive suite of resources to encourage action in communities across the country. The 25...

  • Page 19
    ... a commitment to innovative programs. The Cardinal Health Foundation partners with hundreds of local and national organizations throughout the United States and the world to develop and implement cutting-edge initiatives that make wellness a priority and the utmost in quality patient care the norm...

  • Page 20
    ... services • Medical product distribution services • On-site and remote hospital pharmacy management services • Nuclear pharmacy products and services • Supply chain and inventory optimization expertise • Specialty pharmaceutical products and services • Third-party logistics...

  • Page 21
    ... independent, national or regional chain, mail order, or hospital pharmacy. We also franchise Medicine Shoppe International and Medicap pharmacies across the country and around the world. We streamline operations for hospitals and health systems. We distribute medical and pharmaceutical products to...

  • Page 22
    ... definitions. EXECuTiVE TEaM George S. Barrett Chairman and Chief Executive Officer Shelley A. Bird Executive Vice President, Public Affairs Mark R. Blake Executive Vice President, Strategy and Corporate Development Stephen T. Falk Executive Vice President, General Counsel and Corporate Secretary...

  • Page 23
    ... DIRECTORS Colleen F. Arnold (N) Senior Vice President, Application Management Services, IBM Global Business Services of International Business Machines Corp. George S. Barrett (E) Chairman and Chief Executive Officer Cardinal Health, Inc. Glenn A. Britt (E,A) Chairman and Chief Executive Officer...

  • Page 24
    ... Health's products and services; uncertainties relating to Cardinal Health's ability to retain customers and employees of acquired businesses, including Kinray, Yong Yu and P4 Healthcare, and to achieve the expected benefits from the acquired businesses; uncertainties due to government health care...

  • Page 25
    ..., OHIO (Address of principal executive offices) 43017 (Zip Code) (614) 757-5000 Registrant's telephone number, including area code Securities registered pursuant to Section 12(b) of the Act: Title of Class Name of Each Exchange on Which Registered COMMON SHARES (WITHOUT PAR VALUE) NEW YORK STOCK...

  • Page 26
    ... About Market Risk ...Financial Statements and Supplementary Data ...Changes in and Disagreements With Accountants on Accounting and Financial Disclosure ...Controls and Procedures ...Other Information ...PART III Directors, Executive Officers and Corporate Governance ...Executive Compensation...

  • Page 27
    ... information incorporated by reference) includes forward-looking statements, addressing expectations, prospects, estimates and other matters that are dependent upon future events or developments. Many forward-looking statements appear in "Item 7-Management's Discussion and Analysis of Financial...

  • Page 28
    ...reporting, new product launch support, and contract and chargeback administration. Business operates nuclear pharmacies and cyclotron facilities that manufacture, prepare and deliver radiopharmaceuticals for use in nuclear imaging and other procedures in hospitals and clinics; distributes specialty...

  • Page 29
    ... order to a customer location. Bulk sales generate significantly lower segment profit as a percentage of revenue than non-bulk sales. Customers receive lower pricing on bulk sales of the same products than non-bulk sales due to volume pricing in a competitive market and due to lower costs related...

  • Page 30
    ... in the United States and Canada. This segment also manufactures, sources and develops its own line of private brand medical and surgical products. Manufactured products include: single-use surgical drapes, gowns and apparel; exam and surgical gloves; and fluid suction and collection systems. The...

  • Page 31
    ... (1) Company Location Line of Business Consideration (in millions) July 15, 2010 Healthcare Solutions Holding, LLC ("P4 Healthcare") Yong Yu Kinray, Inc. ("Kinray") Ellicott City, Maryland Specialty pharmaceutical services Shanghai, China Pharmaceutical and medical products distribution $ 598...

  • Page 32
    ... of our distribution operations, including our nuclear pharmacy products and service offerings, and relating to medical and surgical products, such as fluid suction and irrigation devices; surgical waste management systems; surgical and medical examination gloves; surgical drapes, gowns and facial...

  • Page 33
    ...regulatory requirements of the China Ministry of Health, Ministry of Commerce, Ministry of Finance, the State Food and Drug Administration and the General Administration of Customs. Manufacturing and marketing. Our subsidiaries that manufacture and source medical devices are subject to regulation by...

  • Page 34
    ...our pharmacy services and specialty pharmaceutical businesses, involve access to patient identifiable healthcare information. The Health Insurance Portability and Accountability Act of 1996, as augmented by the Health Information Technology for Economic and Clinical Health Act, as well as some state...

  • Page 35
    ... (www.sec.gov) where you can search for annual, quarterly and current reports, proxy and information statements, and other information regarding us and other public companies. Item 1A: Risk Factors The risks described below could materially and adversely affect our results of operations, financial...

  • Page 36
    ...of our gross trade receivable balance at June 30, 2011. If one or more of our large customers default in payment, terminate or do not renew contracts, or significantly reduce their purchases of our products, our results of operations and financial condition could suffer. The United States healthcare...

  • Page 37
    ...numerous distribution centers; receive, process and ship orders on a timely basis; manage the accurate billing and collections for thousands of customers; process payments to suppliers; facilitate the manufacturing and assembly of medical products; and generate financial transactions and information...

  • Page 38
    ... in fiscal 2011, we acquired Kinray, P4 Healthcare and Yong Yu. Acquisitions involve risks: we may overpay for a business or fail to realize the synergies and other benefits we expect from the acquisition; we may encounter unforeseen accounting or internal control over financial reporting issues; or...

  • Page 39
    ... applicable. Item 2: Properties In the United States, the Pharmaceutical segment operates 24 pharmaceutical distribution facilities and one national logistics center; four specialty distribution facilities; and 168 nuclear pharmacy laboratory, manufacturing and distribution facilities. The Medical...

  • Page 40
    ... Executive Officer Chief Financial Officer Chief Executive Officer, Pharmaceutical segment Chief Executive Officer, Medical segment Chief Legal and Compliance Officer Chief Human Resources Officer Executive Vice President, Strategy and Corporate Development Executive Vice President, General Counsel...

  • Page 41
    ... development positions with Medco Health Solutions, Inc., a pharmacy benefits management services company, including Vice President, Business Development and Senior Director, Business Development. Mr. Falk has served as Executive Vice President, General Counsel and Corporate Secretary since May 2009...

  • Page 42
    ... the opening price of CareFusion stock was $19.65 per share. These stock prices were as reported on the New York Stock Exchange Composite Tape. As of August 12, 2011 there were approximately 12,062 shareholders of record of our Common Shares. We anticipate that we will continue to pay quarterly cash...

  • Page 43
    ... in our Deferred Compensation Plan. Also includes 371, 1,174 and 1,388 restricted shares surrendered in April, May and June 2011, respectively, by employees upon vesting to meet tax withholding. (2) On November 3, 2010, our board of directors approved a new $750 million share repurchase program...

  • Page 44
    ... Spin-Off of our clinical and medical products business on August 31, 2009. The line graph assumes, in each case, an initial investment of $100 on August 31, 2009 through and including June 30, 2011, and reinvestment of dividends. We have adjusted the market price of our Common Shares on August 31...

  • Page 45
    ... Company's consolidated financial statements and related notes and "Item 7-Management's Discussion and Analysis of Financial Condition and Results of Operations." 2011 At or for the Fiscal Year Ended June 30, 2010 2009 2008 (In millions, except per common share amounts) 2007 Earnings Data: Revenue...

  • Page 46
    ... services company providing pharmaceutical and medical products and services that help pharmacies, hospitals, surgery centers, physician offices and other healthcare providers focus on patient care while reducing costs, enhancing efficiency and improving quality. We report our financial results...

  • Page 47
    ...2 of the "Notes to Consolidated Financial Statements" for additional information on the Kinray, Yong Yu and P4 Healthcare acquisitions. Spin-Off of CareFusion Effective August 31, 2009, we separated our clinical and medical products business through the distribution to our shareholders of 81 percent...

  • Page 48
    ...the conversion of branded pharmaceuticals to generic pharmaceuticals as well as a shift in sales to certain national chain customers to non-bulk from bulk. Revenue from non-bulk sales was $51.8 billion and $45.8 billion for fiscal 2011 and 2010, respectively. Revenue from non-bulk sales increased 13...

  • Page 49
    ... surgical procedures and consequently our higher-margin products. Fiscal 2010 Compared to Fiscal 2009 Pharmaceutical segment Gross margin decreased $65 million in fiscal 2010 as a result of the factors listed below. • • Pricing changes on renewed customer contracts (exclusive of the related...

  • Page 50
    ...gross margin by $36 million. A one-time gain of $14 million as a result of the recognition of previously deferred intercompany revenue for sales to CareFusion. Distribution, Selling, General and Administrative Expenses ("SG&A") (in millions, except growth rates) Change 2011 2010 2011 SG&A 2010 2009...

  • Page 51
    ... fiscal 2011 compared to the prior year were strong performance in our generic pharmaceutical programs, including the impact of new product launches, the positive impact of acquisitions, and increased margin from branded pharmaceutical sales, offset by customer pricing changes. See the gross margin...

  • Page 52
    ... Earnings In addition to revenue, gross margin and SG&A discussed above, operating earnings were impacted by the following: (in millions) 2011 2010 2009 Restructuring and employee severance ...Acquisition-related costs ...Impairments and loss on sale of assets ...Litigation (recoveries)/charges...

  • Page 53
    ... 2011 and 2010, respectively, related to realized gains from the sale of shares of CareFusion common stock. Provision for Income Taxes Generally, fluctuations in the effective tax rate are due to changes within international and United States state effective tax rates resulting from our business...

  • Page 54
    ... chargeback billings during the last quarter of the reporting period. Chargeback billings are the difference between a product's wholesale acquisition cost and the contract price established between the vendors and the end customer. Fiscal Year Ended June 30, 2011 2010 2009 Days sales outstanding...

  • Page 55
    ...the first quarter of 2011). During fiscal 2010, we received $271 million in proceeds from sale of CareFusion common stock and $154 million from the divestitures of our Martindale business in the United Kingdom and SpecialtyScripts. In addition, we completed a debt tender resulting in the purchase of...

  • Page 56
    ... be able to fund these expenditures through cash provided by operating activities. Fiscal 2012 capital expenditures will be largely focused on information technology projects. Dividends During fiscal 2011, we paid quarterly dividends of $0.195 per share, or $0.78 per share on an annualized basis, an...

  • Page 57
    ... payments for operating leases having initial or remaining non-cancelable lease terms as described in Note 10 of "Notes to Consolidated Financial Statements." (5) Purchase obligations are defined as an agreement to purchase goods or services that is enforceable and legally binding and specifying...

  • Page 58
    ... and market trends. In addition, reserves are reviewed quarterly and updated if appropriate. We may adjust the allowance for doubtful accounts if changes in customers' financial condition or general economic conditions make defaults more frequent or severe. The following table gives information...

  • Page 59
    ...costs and revenue. Using LIFO, if branded pharmaceutical inventory levels decline, the result generally will be a decrease in future cost of products sold: prices for branded pharmaceuticals tend to rise over time, so our older inventory is held at a lower cost. Conversely, if generic pharmaceutical...

  • Page 60
    ...(excluding our nuclear and pharmacy services division and Yong Yu division); Medical segment; nuclear and pharmacy services division; and Yong Yu division. Fair values can be determined using market, income or cost-based approaches. Our determination of estimated fair value of the reporting units is...

  • Page 61
    ... for fiscal 2011. Share-based Compensation All share-based payments to employees, including grants of options, are recognized in the consolidated statements of earnings based on the grant date fair value of the award. The fair value of stock options is determined using a lattice valuation model. We...

  • Page 62
    ... commodity price related changes. We maintain a hedging program to manage volatility related to these market exposures which employs operational, economic, and derivative financial instruments in order to mitigate risk. See Notes 1 and 12 of "Notes to Consolidated Financial Statements" for further...

  • Page 63
    ...primarily as a result of contract adjustments with vendors, volatility of commodity prices, changes in purchasing volumes and changes in the mix of items we buy. We have updated the prior year comparable commodity exposure to include all items meeting this criteria. At June 30, 2011 and 2010, we had...

  • Page 64
    Item 8: Financial Statements and Supplementary Data 39 40 41 42 43 44 91 Report of Independent Registered Public Accounting Firm ...Consolidated Financial Statements and Schedule: Consolidated Statements of Earnings for the Fiscal Years Ended June 30, 2011, 2010 and 2009 ...Consolidated Balance ...

  • Page 65
    ... the information set forth therein. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the Company's internal control over financial reporting as of June 30, 2011, based on criteria established in Internal Control-Integrated...

  • Page 66
    ..., 2011 2010 2009 (In millions, except per common share amounts) Revenue ...Cost of products sold ...Gross margin ...Operating expenses: Distribution, selling, general and administrative expenses ...Restructuring and employee severance ...Acquisition-related costs ...Impairments and loss on sale of...

  • Page 67
    CARDINAL HEALTH, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS June 30, June 30, 2011 2010 (In millions) ASSETS Current assets: Cash and equivalents ...Trade receivables, net ...Inventories ...Prepaid expenses and other ...Total current assets ...Property and equipment, at cost: Land, buildings...

  • Page 68
    CARDINAL HEALTH, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY Common Shares Shares Issued Amount Accumulated Other Total Treasury Shares Retained Comprehensive Shareholders' Earnings Shares Amount Income/(Loss) Equity (In millions) BALANCE JUNE 30, 2008 ...Comprehensive ...

  • Page 69
    CARDINAL HEALTH INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS Fiscal Year Ended June 30, 2011 2010 2009 (In millions) CASH FLOWS FROM OPERATING ACTIVITIES: Net earnings ...(Earnings)/loss from discontinued operations ...Earnings from continuing operations ...Adjustments to reconcile ...

  • Page 70
    ...SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Cardinal Health, Inc., an Ohio corporation formed in 1979, is a healthcare services company providing pharmaceutical and medical products and services that help pharmacies...

  • Page 71
    ... and their corresponding percent of gross trade receivables. The customers in the table below are serviced through our Pharmaceutical segment. Percent of Gross Trade Receivables at June 30, 2011 2010 Percent of Revenue 2011 2010 2009 Walgreen Co...CVS Caremark Corporation ... 23% 24% 24% 22% 22...

  • Page 72
    ... members through the contractual arrangements established with Novation, LLC and Premier Purchasing Partners, L.P., our two largest GPO relationships in terms of revenue: Percent of Revenue 2011 2010 2009 GPO members ... 14% 15% 15% Our trade receivable balances are with individual members of the...

  • Page 73
    ...below an operating segment. In fiscal 2011, we identified four reporting units: Pharmaceutical segment, excluding our nuclear and pharmacy services division and Yong Yu division; Medical segment; nuclear and pharmacy services division; and Yong Yu division. Fair values can be determined using market...

  • Page 74
    ... of third-party returns. Accounting for Vendor Incentives. Fees for services and other incentives received from vendors relating to the purchase or distribution of inventory are generally reported as a reduction of cost of products sold in the consolidated statements of earnings. We consider...

  • Page 75
    ... upon delivery of the product to the customer. Service-related revenue, including fees received for analytical services or sales and marketing services, is recognized upon the completion of such services. Pharmacy management, third-party logistics and other service revenue is recognized as the...

  • Page 76
    ...30, 2011 2010 2009 (in millions) Shipping and handling costs ... $325.7 $293.5 $289.7 Revenue received for shipping and handling was immaterial for all periods presented. Translation of Foreign Currencies. Financial statements of our subsidiaries outside the United States are generally measured...

  • Page 77
    ..., 2010, we completed the acquisition of privately held Kinray, Inc. ("Kinray") for $1.3 billion in an all-cash transaction. Kinray is a wholesale pharmaceutical distribution company which serves retail independent pharmacies primarily in the New York metropolitan area. Yong Yu. On November 29, 2010...

  • Page 78
    ... three acquisitions described above: (in millions) Kinray Yong Yu P4 Healthcare Identifiable intangible assets Trade names (1) ...Customer relationships (2) ...Non-compete agreements (3) ...Other (4) ...Total identifiable intangible assets acquired ...Cash and equivalents ...Trade receivables, net...

  • Page 79
    ... purchase price of this acquisition, which was paid in cash, was $128.6 million. Assumed liabilities of this acquired business were $102.1 million. The consolidated financial statements include the results of operations from this business combination from the date of acquisition. Acquisition-Related...

  • Page 80
    ... AND LOSS ON SALE OF ASSETS During fiscal 2010, we recognized an $18.1 million impairment charge related to the write-down of SpecialtyScripts, LLC ("SpecialtyScripts"), a business within the Pharmaceutical segment, to net expected fair value less costs to sell. See Note 5 for further information...

  • Page 81
    ... the former Pharmaceutical Technologies and Services segment, other than certain generic-focused businesses (the "PTS Business"). See Note 7 of the "Notes to Consolidated Financial Statements" from the Annual Report on Form 10-K for the fiscal year ended June 30, 2009 for information regarding the...

  • Page 82
    ... increase in the Pharmaceutical segment in fiscal 2011 is primarily due to the acquisitions of Kinray, Yong Yu and P4 Healthcare. Goodwill recognized in connection with these acquisitions primarily represents the expected benefit from synergies of integrating these businesses as well as the existing...

  • Page 83
    ...assets during fiscal 2011 is primarily due to the acquisitions of Kinray, Yong Yu and P4 Healthcare. See Note 2 for further discussion of these acquisitions. The following table summarizes amortization expense during fiscal 2011, 2010 and 2009: Fiscal Year Ended June 30, 2011 2010 2009 (in millions...

  • Page 84
    ... with a new $1.5 billion facility that expires in May 2016. The revolving credit facility exists largely to support issuances of commercial paper as well as other short-term borrowings for general corporate purposes. We also maintain a $950.0 million committed receivables sales facility program...

  • Page 85
    ...for income taxes from continuing operations consists of the following for fiscal 2011, 2010 and 2009: (in millions) Fiscal Year Ended June 30, 2011 2010 2009 Current: Federal ...State and local ...Non-U.S...Total ...Deferred: Federal ...State and local ...Non-U.S...Total ...Total provision ... $387...

  • Page 86
    ...2011 2010 Deferred income tax assets: Receivable basis difference ...Accrued liabilities ...Share-based compensation ...Loss and tax credit carryforwards ...Deferred tax assets related... sheets. At June 30, 2011, we had gross federal, state and international loss and credit carryforwards of $225...

  • Page 87
    ... tax expense. We file income tax returns in the U.S. federal jurisdiction, various U.S. state jurisdictions and various foreign jurisdictions. With few exceptions, we are subject to audit by taxing authorities for fiscal 2001 through the current fiscal year. The Internal Revenue Service ("IRS") is...

  • Page 88
    ... lead to product recalls, costs to repair or replace affected products, temporary interruptions in product sales, and action by regulators. We accrue for contingencies related to litigation and regulatory matters. We accrue an estimated loss contingency in our consolidated financial statements if it...

  • Page 89
    ..., we enter into interest rate swaps to further manage our exposure to interest rate variations related to our borrowings and to lower our overall borrowing costs. Currency Exchange Risk Management. We conduct business in several major international currencies and are subject to risks associated with...

  • Page 90
    ...management believes the risk of loss is remote and, in any event, would not be material. Additionally, we do not require collateral under these agreements. The following table summarizes the fair value of our assets and liabilities related to derivative financial instruments, and the respective line...

  • Page 91
    ... and 2009: (in millions) Statements of Earnings Line Item Fiscal Year Ended June 30, 2011 2010 2009 Pay-fixed interest rate swaps ...Foreign currency contracts ...Foreign currency contracts ...Foreign currency contracts ...Commodity contracts ... Interest expense, net Revenue Cost of products sold...

  • Page 92
    ... consolidated statement of cash flows. Commodity Contracts. During fiscal 2011, we entered into swap contracts of certain commodities to mitigate price volatility for materials we purchase or use in our manufacturing and distribution businesses. These instruments do not qualify for hedge accounting...

  • Page 93
    ...based upon the estimated amount that we would receive (or pay) to terminate the contracts as of June 30, 2011 and 2010. The fair values are based on quoted market prices for the same or similar instruments. June 30, 2011 Notional Fair Value Amount Gain/(Loss) June 30, 2010 Notional Fair Value Amount...

  • Page 94
    ... 2 for additional information regarding the contingent consideration obligation related to the P4 Healthcare acquisition. (5) The fair value of our investment in CareFusion common stock was determined using the quoted market price of the security. 14. SHAREHOLDERS' EQUITY At June 30, 2011 and 2010...

  • Page 95
    ...party logistics support services to hospitals, clinics, and other providers; franchises retail pharmacies under the Medicine Shoppe® and Medicap® brands; and provides pharmacy services to hospitals and other healthcare facilities. This segment also distributes specialty pharmaceutical products and...

  • Page 96
    ..., gowns and apparel; exam and surgical gloves; and fluid suction and collection systems. Our medical and surgical products are sold directly or through third-party distributors in the United States, Canada, Europe, South America, and the Asia/Pacific region. The following table includes revenue for...

  • Page 97
    ...includes total assets at June 30, 2011, 2010 and 2009 for each segment as well as reconciling items necessary to total the amounts reported in the consolidated financial statements: (in millions) 2011 June 30, 2010 2009 Pharmaceutical ...Medical ...Corporate ...Total consolidated assets ... $16,125...

  • Page 98
    ...directors and employees. Employee stock options granted under the Plans from fiscal 2008 through fiscal 2011 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 market price of the Common Shares...

  • Page 99
    ... millions, except per share data and years) 2011 2010 2009 Weighted-average grant date fair value per stock option (1) ...Aggregate intrinsic value of exercised options ...Cash received upon exercise ...Cash tax disbursements realized related to exercise ...Total compensation cost, net of estimated...

  • Page 100
    ... share units is determined by the number of shares granted and the grant date market price of our Common Shares. The following summarizes all transactions related to restricted shares and restricted share units under the Plans from June 30, 2009 through June 30, 2011: Weighted Average Grant...

  • Page 101
    ..., on August 31, 2009, we adjusted share-based compensation awards granted under the Plans into awards based on our Common Shares and/or CareFusion common stock, as applicable. For purposes of the vesting of these equity awards, continued employment or service with us or with CareFusion is treated as...

  • Page 102
    ...Third Quarter Fourth Quarter Fiscal 2011 Revenue ...$24,437.5 $25,371.8 $26,071.4 $26,763.5 Gross margin ...962.2 994.2 1,162.2 1,043.4 Distribution, selling, general and administrative expenses ...591.9 621.9 697.3 683.8 Earnings from continuing operations ...294.4 215.0 249.5 207.3 Earnings/(loss...

  • Page 103
    ..., which includes a new information system for certain supply chain processes. This project did not impact internal control over financial reporting during fiscal 2011. The Medical segment plans to transition selected processes to the new system throughout fiscal 2012 and 2013, and this transition...

  • Page 104
    ... PUBLIC ACCOUNTING FIRM To the Shareholders and the Board of Directors of Cardinal Health, Inc. We have audited Cardinal Health, Inc. and subsidiaries' (the "Company") internal control over financial reporting as of June 30, 2011, based on criteria established in Internal Control-Integrated...

  • Page 105
    ...relating to 2011 Annual Meeting of Shareholders (our "2011 Proxy Statement") under the captions "Proposal 1-Election of Directors," "Section 16(a) Beneficial Ownership Reporting Compliance," "Board of Directors and Committees of the Board," and "Corporate Governance." Item 11: Executive Compensation...

  • Page 106
    ... 30, 2011, 2010 and 2009 ...Notes to Consolidated Financial Statements ...(a)(2) The following Supplemental Schedule is included in this report: 39 40 41 42 43 44 Page Schedule II-Valuation and Qualifying Accounts ... 91 All other schedules not listed above have been omitted as not applicable or...

  • Page 107
    ... to Exhibit 10.1.2 to Cardinal Health's Quarterly Report on Form 10-Q for the quarter ended September 30, 2009, File No. 1-11373)* Form of Nonqualified Stock Option Agreement under the Cardinal Health, Inc. 2005 Long-Term Incentive Plan, as amended (grants made to executive officers in August 2006...

  • Page 108
    ...to Exhibit 10.1.4 to Cardinal Health's Quarterly Report on Form 10-Q for the quarter ended September 30, 2009, File No. 1-11373)* Form of Restricted Share Units Agreement under the Cardinal Health, Inc. 2005 Long-Term Incentive Plan, as amended (grants to be made to executive officers in August 2010...

  • Page 109
    ... to executive officers in September 2005) (incorporated by reference to Exhibit 10.03 to Cardinal Health's Quarterly Report on Form 10-Q for the quarter ended March 31, 2005, File No. 1-11373)* Copy of resolutions adopted by the Human Resources and Compensation Committee of the Board of Directors on...

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    ...to Exhibit 10.2.1 to Cardinal Health's Quarterly Report on Form 10-Q for the quarter ended September 30, 2009, File No. 1-11373)* Form of Directors' Stock Option Agreement under the Cardinal Health, Inc. 2007 Nonemployee Directors Equity Incentive Plan (grants made in November 2008) (incorporated by...

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    ...Report on Form 10-Q for the quarter ended December 31, 2009, File No. 1-11373)* Form of Nonqualified Stock Option Agreement under the Cardinal Health, Inc. Broadly-based Equity Incentive Plan, as amended (grants made to executive officers in November 2003)* Cardinal Health Deferred Compensation Plan...

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    ... to Cardinal Health's Annual Report on Form 10-K for the fiscal year ended June 30, 2009, File No. 1-11373)* Description of Nonemployee Directors Compensation effective November 2, 2011* Issuing and Paying Agency Agreement, dated August 9, 2006, between Cardinal Health, Inc. and The Bank of New York...

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    ... Book Managers (incorporated by reference to Exhibit 10.1 to Cardinal Health's Current Report on Form 8-K filed on May 13, 2011, File No. 1-11373) Third Amended and Restated Receivables Purchase Agreement, dated as of November 19, 2007, among Cardinal Health Funding, LLC, Griffin Capital, LLC, each...

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    ... of Earnings to Fixed Charges List of Subsidiaries of Cardinal Health, Inc. Consent of Independent Registered Public Accounting Firm Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 Certification of Chief Financial Officer pursuant to Section 302 of...

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    ... Document Management contract or compensation plan or arrangement. Cardinal Health Website We use our website as a channel of distribution for material information about us. Important information, including news releases, earnings and analyst presentations and financial information regarding...

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    ... 25, 2011. Name Title /s/ GEORGE S. BARRETT George S. Barrett Chairman and Chief Executive Officer and Director (principal executive officer) Chief Financial Officer (principal financial officer) Senior Vice President and Chief Accounting Officer (principal accounting officer) Director Director...

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    CARDINAL HEALTH, INC. AND SUBSIDIARIES SCHEDULE II-VALUATION AND QUALIFYING ACCOUNTS (3) Balance at Beginning of Period Charged to Costs and Expenses Charged to Other Accounts (1) Deductions (2) (In millions) Balance at End of Period Description Fiscal Year 2011: Accounts receivable ...Finance ...

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    ...Available information includes historical stock information, research analyst coverage, past and present financial statements, recent company presentations, SEC filings, corporate governance guidelines and board committee charters. This information- including the Cardinal Health Annual Report, Forms...

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    Annual Report © 2011 Cardinal Health. All rights reserved. CARDINAL HEALTH, the Cardinal Health LOGO, CARDINALASSIST, PRESOURCE, VALUELINK, eRECOVERY, CONVERTORS, OPTIFRIEGHT and Essential to Care are trademarks or registered trademarks of Cardinal Health. All other marks are the property of their...