Cardinal Health 2008 Annual Report Download - page 56

Consolidated Results of Operations
The following table summarizes the Company’s consolidated results of operations for the fiscal years ended
June 30, 2008, 2007 and 2006 (in millions, except per Common Share amounts):
Change (1) Consolidated Results of Operations
2008 2007 2008 2007 2006
Revenue ..................................... 5% 9% $91,091.4 $86,852.0 $79,664.2
Cost of products sold ........................... 5% 9% 85,457.3 81,606.7 74,850.2
Gross margin ................................. 7% 9% $ 5,634.1 $ 5,245.3 $ 4,814.0
Selling, general and administrative expenses (2) ..... 11% 7% 3,414.8 3,082.3 2,882.8
Impairments, (gain)/loss on sale of assets and other,
net ....................................... N.M. N.M. (32.0) 17.3 5.8
Special items ................................. N.M. N.M. 130.1 772.0 80.5
Operating earnings ............................. 54% (26)% $ 2,121.2 $ 1,373.7 $ 1,844.9
Interest expense and other ....................... 41% 16% 171.4 121.4 104.5
Earnings before income taxes and discontinued
operations .................................. 56% (28)% $ 1,949.8 $ 1,252.3 $ 1,740.4
Provision for income taxes ...................... 54% (29)% 633.9 412.6 577.1
Earnings from continuing operations .............. 57% (28)% $ 1,315.9 $ 839.7 $ 1,163.3
Earnings/(loss) from discontinued operations ........ N.M. N.M. (15.3) 1,091.4 (163.2)
Net earnings .................................. (33)% 93% $ 1,300.6 $ 1,931.1 $ 1,000.1
Net diluted earnings per Common Share ............ (25)% 105% $ 3.57 $ 4.77 $ 2.33
(1) Change is calculated as the percentage increase or (decrease) for a given year as compared to the
immediately preceding year.
(2) Equity-based compensation expense was $122 million, $138 million and $208 million, respectively, for the
fiscal years ended June 30, 2008, 2007 and 2006.
Revenue
Revenue increased $4.2 billion or 5% during fiscal 2008. The increase was due to pharmaceutical price
appreciation and increased volume from existing customers (the combined impact of pharmaceutical price
appreciation and increased volume was $4.9 billion), the impact of acquisitions ($817 million) and new
customers ($643 million). The Company uses the internal metric “pharmaceutical price appreciation index” to
evaluate the impact of pharmaceutical and consumer product price appreciation on revenue from the
pharmaceutical supply chain business. This metric is calculated using the change in the manufacturer’s published
price at the beginning of the period as compared to the end of the period weighted by the units sold by the
pharmaceutical supply chain business during the period. The pharmaceutical price appreciation index was 7.7%
for the trailing twelve months ended June 30, 2008. Revenue was negatively impacted during fiscal 2008 by the
loss of customers ($2.1 billion) primarily due to the loss of customers within the Healthcare Supply Chain
Services—Pharmaceutical segment. A portion of these losses was due to the DEA license suspensions and the
Company’s controlled substance anti-diversion efforts. Refer to “Segment Results of Operations” below for
further discussion of the specific factors affecting revenue in each of the Company’s reportable segments.
Revenue increased $7.2 billion or 9% during fiscal 2007 due to growth in each of the Company’s four reportable
segments, including revenue growth of $6.5 billion within the Healthcare Supply Chain Services—Pharmaceutical
segment, due primarily to growth in revenue from bulk customers ($4.0 billion). The increase in revenue from bulk
customers was due to certain existing customers deciding to purchase a greater volume of product from the Company
rather than directly from the manufacturer and to pharmaceutical price appreciation. The pharmaceutical price
appreciation index was 6.3% during fiscal 2007.
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