Cardinal Health 2008 Annual Report Download - page 61

During the second quarter of fiscal 2008, the effective tax rate from continuing operations was favorably
impacted by a $9 million adjustment as a result of the release of a valuation allowance that had previously been
established with respect to an investment within the Healthcare Supply Chain Services—Pharmaceutical segment
which was divested during the second quarter of fiscal 2008. During the third quarter of fiscal 2008, the effective
tax rate was negatively impacted by $7 million as a result of various discrete miscellaneous tax adjustments.
During the fourth quarter of fiscal 2008, the effective tax rate from continuing operations was favorably impacted
by the release of $30 million of tax reserves for items pertaining to fiscal 2002 and 2001 for which the statute of
limitations had lapsed and was negatively impacted by the recognition of $37 million of additional tax expense
related to an increase in the estimated state income tax rate on deferred taxes.
The Company’s fiscal 2007 provision for income taxes relative to earnings before income taxes and
discontinued operations was $413 million and the effective tax rate was 32.9% The fiscal 2007 effective tax rate
was adversely impacted by 0.75 percentage points due to the non-deductibility of certain special items and
impairments, principally the IPR&D charge related to the Viasys acquisition.
During the first quarter of fiscal 2007, the effective tax rate from continuing operations was favorably
impacted by a $10 million adjustment to the tax reserves primarily due to the issuance of a final IRS Revenue
Agent Report that related to fiscal years 2001 and 2002. During the second quarter of fiscal 2007, the effective
tax rate from continuing operations was negatively impacted by a $7 million adjustment to the tax reserves
related to an ongoing international tax audit. During the third quarter of fiscal 2007, the Company entered into an
agreement with the IRS to close the fiscal years 1996 through 2000 federal audits. As a result, the Company
reversed tax reserves of approximately $9 million.
The Company’s fiscal 2006 provision for income taxes relative to earnings before income taxes and
discontinued operations was $577 million and the effective tax rate was 33.2%. The fiscal 2006 effective tax rate
was adversely impacted by a 0.2 percentage points due to the non-deductibility of certain special items.
During fiscal 2008, the Company repatriated cash of $308 million from non-U.S. subsidiaries. As a result, it
incurred taxable dividends of $14 million, nontaxable return of capital/currency gain of $161 million and taxable
capital gain of $132 million. The taxable capital gain amount of $132 million was fully offset with a previously
unrecognized capital loss carryforward, and foreign tax credits of $14 million were recorded related to the
taxable dividends resulting in a net tax benefit of $4 million.
Provision for Income Taxes—Discontinued Operations
The Company’s fiscal 2008 provision for income taxes relative to discontinued operations was an expense
of $32 million. Included within this amount is a $28 million increase in unrecognized tax benefits for uncertain
tax positions related to the PTS Business.
Earnings/(Loss) from Discontinued Operations
Earnings from discontinued operations, net of tax, decreased by $1.1 billion during fiscal 2008 primarily
due to the after-tax gain on the sale of the PTS Business ($1.1 billion) in the prior year. See Note 8 in the “Notes
to Consolidated Financial Statements” for additional information on the Company’s discontinued operations.
Earnings from discontinued operations, net of tax increased by $1.3 billion during fiscal 2007 primarily due
to the after-tax gain on the sale of the PTS Business ($1.1 billion) and impairment charges from prior year ($185
million). See Note 8 in “Notes to Consolidated Financial Statements” for further information on the Company’s
discontinued operations.
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