Cardinal Health 2008 Annual Report Download - page 116

mature on June 15, 2017. Interest on the 2012 and 2017 Notes accrues at 5.65% and 6.00%, respectively, per year
payable semi-annually. If the Company experiences specific types of change of control and the notes are rated
below investment grade by S&P, Moody’s, and Fitch, the Company will be required to offer to purchase the 2012
and 2017 Notes at 101% of the principal amount thereof, plus accrued and unpaid interest, if any, to the date of
repurchase. The Company also agreed for the benefit of the holders to register the 2012 and 2017 Notes under the
Securities Act pursuant to a registered exchange offer so that the 2012 and 2017 Notes may be sold in the public
market. Because the Company did not meet certain deadlines for completion of the exchange offer, the interest
rates on the 2012 and 2017 Notes increased by 25 basis points as of February 4, 2008. Effective March 14, 2008,
the Company completed the exchange offer and such additional interest on the 2012 Notes and 2017 Notes is no
longer payable. The Company used the net proceeds from the sale of the 2012 and 2017 Notes to fund a portion
of the purchase price of the Viasys acquisition and for other general corporate purposes.
In June 2008, the Company sold $300 million aggregate principal amount of fixed rate notes due 2013 (“the
2013 Notes”) in a registered offering. The 2013 Notes mature on June 15, 2013. Interest on the 2013 Notes
accrues at 5.50% per year payable semi-annually. If the Company experiences specific types of change of control
and the notes are rated below investment grade by S&P, Moody’s, and Fitch, the Company will be required to
offer to purchase the 2013 Notes at 101% of the principal amount thereof, plus accrued and unpaid interest, if
any, to the date of repurchase. The Company used a portion of the proceeds to date to repay $150 million of
6.25% Notes due 2008 on July 15, 2008. The Company expects to use the remaining proceeds for general
corporate purposes, which may include refinancing the outstanding preferred debt securities discussed below.
As part of the Company’s acquisition of Alaris in fiscal 2004, the Company assumed $195.3 million of
7.25% senior subordinated notes due 2011. During fiscal 2005, the Company paid off $183.6 million of the
senior subordinated notes. On July 2, 2007, the Company exercised the option to call the senior subordinated
notes resulting in the repayment of the remaining balance of $11.2 million.
During fiscal 2001, the Company entered into an agreement to periodically sell trade receivables to a special
purpose accounts receivable and financing entity, which is exclusively engaged in purchasing trade receivables
from, and making loans to, the Company (the “Accounts Receivable and Financing Entity”). The Accounts
Receivable and Financing Entity, which is consolidated by the Company as it is the primary beneficiary of the
variable interest entity, issued $250.0 million and $400.0 million in preferred variable debt securities to parties not
affiliated with the Company during fiscal 2004 and 2001, respectively. On October 26, 2006, the Company
amended certain of the facility terms of the Company’s preferred debt securities. As part of this amendment, the
Company repaid $500.0 million of the principal balance with a portion of the proceeds of the October 2006 sale of
notes discussed above and a minimum net worth covenant was added whereby the minimum net worth of the
Company cannot fall below $5.0 billion at any time. The amendment eliminated a minimum adjusted tangible net
worth covenant (adjusted tangible net worth could not fall below $2.5 billion) and certain financial ratio covenants.
After the repayment, the Company had $150 million of preferred debt securities outstanding. These preferred debt
securities are classified as “long-term obligations, less current portion and other short-term obligations” in the
Company’s consolidated balance sheet. As a result of the opening of the initial exchange period of the preferred
debt securities, the Company may refinance the outstanding preferred debt securities during fiscal 2009. At June 30,
2008 and 2007, the Accounts Receivable and Financing Entity owned approximately $607.7 million and
$594.7 million, respectively, of receivables that are included in the Company’s consolidated balance sheet. The
effective interest rate as of June 30, 2008 and 2007 was 3.48% and 5.94%, respectively. Other than for loans made
to the Company or for breaches of certain representations, warranties or covenants, the Accounts Receivable and
Financing Entity does not have any recourse against the general credit of the Company.
In addition to cash, at June 30, 2008 and 2007, the Company’s sources of liquidity included a $1.5 billion
commercial paper program backed by a $1.5 billion revolving credit facility. The Company initiated a
$1.0 billion commercial paper program in August 2006, which replaced its former $1.5 billion commercial paper
program. The Company increased the commercial paper program to $1.5 billion on February 28, 2007. The
Company had no outstanding borrowings from the commercial paper program at June 30, 2008 or 2007.
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