Cardinal Health 2008 Annual Report Download - page 31

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On an ongoing basis, the Company evaluates possible candidates for merger or acquisition and considers
opportunities to expand its operations and services across all reportable segments. These acquisitions may
involve the use of cash, stock or other securities as well as the assumption of indebtedness and liabilities.
From July 1, 2003 to June 30, 2008, the Company completed several divestiture transactions. These
transactions include divesting the international and non-core domestic businesses of Syncor International
Corporation (“Syncor”) in several transactions since acquiring Syncor in fiscal 2003. During fiscal 2006, the
Company divested a significant portion of its specialty distribution business. During fiscal 2007, the Company
completed the sale of its former Pharmaceutical Technologies and Services segment, other than certain generic-
focused businesses (the segment, excluding the certain generic-focused businesses that were not sold, is referred
to as the “PTS Business”) to an affiliate of The Blackstone Group. At the closing of the PTS Business sale, the
Company received approximately $3.2 billion in cash, which was the purchase price of approximately
$3.3 billion as adjusted pursuant to certain provisions in the purchase agreement. Also during fiscal 2007, the
Company divested its healthcare marketing services business and its United Kingdom-based Intercare
pharmaceutical distribution business.
The Company continues to evaluate the performance and strategic fit of its businesses and may decide to sell
a business or product line based on such an evaluation. As discussed above, effective July 1, 2008, the Company
will begin reporting in three reportable segments. As of July 1, 2008, the All Other segment includes Medicine
Shoppe and the pharmacy services, Tecomet and MedSystems businesses. While these businesses continue to add
value to the Company, the Company will be conducting an in-depth review during fiscal 2009 to evaluate the fit of
such businesses in the existing segment structure. The Company entered into a definitive agreement to sell the
Tecomet business to Charlesbank Capital Partners and Tecomet management on July 22, 2008.
For additional information concerning certain of the transactions described above, see Notes 2, 3 and 8 of
“Notes to Consolidated Financial Statements” and “Item 7—Management’s Discussion and Analysis of Financial
Condition and Results of Operations.”
Customers
The Company’s largest customers, CVS Caremark Corporation (“CVS”) and Walgreen Co. (“Walgreens”),
accounted for approximately 22% and 19%, respectively, of the Company’s revenue for fiscal 2008. The
aggregate of the Company’s five largest customers, including CVS and Walgreens, accounted for approximately
52% of the Company’s revenue for fiscal 2008. All of the Company’s business with its five largest customers is
included in its Healthcare Supply Chain Services—Pharmaceutical segment. The loss of one or more of these
five customers could adversely affect the Company’s results of operations and financial condition.
Businesses in each of the Company’s reportable segments have agreements with group purchasing
organizations (“GPOs”) that act as agents that negotiate vendor contracts on behalf of their members.
Approximately 16% of the Company’s revenue for fiscal 2008 was derived from GPO members through the
contractual arrangements established with Novation, LLC (“Novation”) and Premier Purchasing Partners, L.P.
(“Premier”), the Company’s two largest GPO relationships in terms of member revenue. Although GPO vendor
selections are influential to GPO member sourcing decisions, compliance by GPO members with those vendor
selections is generally voluntary. As such, the Company believes the loss of any of the Company’s agreements
with a GPO would not mean the loss of sales to all members of the GPO, although the loss of such an agreement
could adversely affect the Company’s results of operations and financial condition. See Note 1 in “Notes to
Consolidated Financial Statements” for further information regarding the Company’s concentrations of credit
risk and major customers.
Suppliers
The Company obtains its products from many different suppliers. Products obtained from the Company’s
five largest suppliers accounted on a combined basis for approximately 19% of the Company’s revenue during
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