Cardinal Health 2008 Annual Report Download - page 54

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Item 7: Management’s Discussion and Analysis of Financial Condition and Results of Operations
The discussion and analysis presented below refers to and should be read in conjunction with the
consolidated financial statements and related notes included in this Form 10-K. Unless otherwise indicated,
throughout this Management’s Discussion and Analysis of Financial Condition and Results of Operations,
discussion of matters in the Company’s consolidated financial statements refers to continuing operations.
Company Overview
Strategic Overview
Cardinal Health is a $91 billion, global company serving the healthcare industry with products and services
that help hospitals, physician offices and pharmacies reduce costs, improve safety, productivity and profitability,
and deliver better care to patients. Cardinal Health’s distribution businesses consolidate pharmaceuticals and
medical products from thousands of manufacturers into site-specific deliveries to retail pharmacies, hospitals,
physician offices, surgery centers and alternate care facilities. With more than 18,000 employees in its
distribution businesses across North America, Cardinal Health provides comprehensive financial, inventory,
contract management and marketing services. Cardinal Health is also the largest provider of specialized nuclear
pharmaceuticals, delivering more than 13 million doses each year to hospitals and outpatient care centers.
Cardinal Health also manufactures medication infusion and dispensing products, respiratory equipment,
surgical instruments and leading technologies and services that help hospitals prevent medication errors, reduce
hospital-acquired infections and manage medications and supplies more efficiently. Cardinal Health products
provide protection against medication errors for more than 3.1 billion doses each year using CareFusion®patient
identification systems, Alaris®infusion devices and Pyxis®medication dispensing systems. Infection prevention
products include Convertors®brand surgical gowns, Esteem®brand medical gloves, Chloraprep®brand
preoperative skin preparation products, as well as electronic infection surveillance through MedMined®services.
The Company also leads in the respiratory care category through its AVEA®respirators and other leading
ventilation brands. Cardinal Health’s global manufacturing operations employ more than 20,000 people on five
continents. The Company believes that its depth and breadth of products are unique in the industry and give it a
competitive advantage.
During fiscal 2008, the Company’s four operating and reportable segments were aligned within two sectors:
Healthcare Supply Chain Services, which includes the Healthcare Supply Chain Services—Pharmaceutical and
Healthcare Supply Chain Services—Medical segments; and Clinical and Medical Products, which includes the
Clinical Technologies and Services and Medical Products and Technologies segments. The Healthcare Supply
Chain Services sector focuses on delivering best-in-class distribution and logistics services to its customers. The
sector generates approximately 94% of the Company’s total segment revenue, approximately 64% of the
Company’s total segment profit (as defined below in the “Segment Results of Operations” section) and consistent
and reliable cash flow. The Clinical and Medical Products sector focuses largely on developing innovative
products for hospitals and other providers of care. The sector, with its higher margin products and services and
faster growing segment profit has grown to contribute approximately 36% of the Company’s total segment
profit.
On July 8, 2008, the Company announced a reorganization and the consolidation of its businesses into two
primary operating and reportable segments, the Healthcare Supply Chain Services and Clinical and Medical
Products segments, to reduce costs and align resources with the unique needs of each segment. To reflect the new
management structure, beginning July 1, 2008, the Company will report results for three reportable segments:
Healthcare Supply Chain Services, Clinical and Medical Products and All Other.
On August 7, 2008, the Company publicly announced that its Board of Directors has supported a
management recommendation to actively explore a potential separation of the Company’s new Healthcare
Supply Chain Services and Clinical and Medical Products reportable segments, which management is proceeding
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