Cardinal Health 2008 Annual Report Download - page 102

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3. SPECIAL ITEMS AND IMPAIRMENTS, (GAIN)/LOSS ON SALE OF ASSETS AND OTHER
Special Items Policy
The Company classifies restructuring charges, acquisition integration charges and certain litigation and
other items as special items. A restructuring activity is a program whereby the Company fundamentally changes
its operations such as closing facilities, moving 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. Restructuring charges are recorded in accordance with
SFAS No. 146, “Accounting for Costs Associated with Exit or Disposal Activities.” Under SFAS No. 146, a
liability is measured at its fair value and recognized as incurred.
Acquisition integration charges include costs to integrate acquired companies. Upon acquisition, certain
integration charges are included within the purchase price allocation in accordance with SFAS No. 141,
“Business Combinations,” and other integration charges are recognized as special items as incurred.
The Company recognizes income from the favorable outcome of legal settlements, judgments or other
resolution of legal and regulatory matters as special items on the consolidated financial statements when the
associated cash or assets are received. Generally, expenses due to the unfavorable outcome of legal settlements,
judgments or other resolution of legal and regulatory matters (“litigation settlement losses”) are charged to the
segment to which the matter relates and, as a result, are classified as SG&A expenses on the Company’s
consolidated financial statements. In certain circumstances, significant litigation settlement losses are classified
in special items on the consolidated statement of earnings. Factors considered in determining whether a particular
litigation settlement loss should be classified in special items include the size of the settlement, the nature of the
matter (i.e., significant matters that are infrequent, non-recurring or unusual in nature are classified as special
items), the age of the matter and the pervasiveness of the matter to the entire organization. The Company also
classifies legal fees and document preservation and production costs incurred in connection with the previously-
disclosed SEC investigation and related Audit Committee internal review and related matters as special items.
For information regarding these investigations, see the Company’s Annual Report on Form 10-K for the fiscal
year ended June 30, 2007, as amended (the “2007 Form 10-K”).
Special Items
The following is a summary of the special items for fiscal years ended June 30, 2008, 2007, and 2006:
For the Fiscal Year Ended
June 30,
(in millions, except for diluted EPS amounts) 2008 2007 2006
Restructuring charges .................................................. $ 65.7 $ 40.1 $ 47.6
Acquisition integration charges ........................................... 44.9 101.5 25.4
Litigation, net ......................................................... 15.5 626.0 (19.0)
Other ............................................................... 4.0 4.4 26.5
Total special items ..................................................... $130.1 $ 772.0 $ 80.5
Tax effect of special items (1) ............................................ (43.8) (243.1) (22.6)
Net earnings effect of special items ........................................ $ 86.3 $ 528.9 $ 57.9
Net decrease in Diluted EPS ............................................. $ 0.24 $ 1.31 $ 0.14
(1) The Company applies varying tax rates to its special items depending upon the tax jurisdiction where the
item was incurred.
Restructuring Charges
During fiscal 2005, the Company launched a global restructuring program with a goal of increasing the
value the Company provides its customers through better integration of existing businesses and improved
efficiency from a more disciplined approach to procurement and resource allocation. The Company expects the
program to be implemented in three phases and be substantially completed by the end of fiscal 2009.
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