Cardinal Health 2008 Annual Report Download - page 69

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During fiscal 2007, Healthcare Supply Chain Services—Medical segment revenue grew $315 million or 4%
primarily due to increased volume from existing customers ($215 million) and new customer accounts
($100 million). Healthcare Supply Chain Services—Medical segment profit increased $4 million or 1% during
fiscal 2007. Gross margin increased segment profit by $27 million primarily as a result of revenue growth and
the impact of increased manufacturer cash discounts ($6 million). Negatively impacting gross margin were
increased customer discounts ($5 million) and trade receivable reserves ($7 million) related to the segment’s
customer service and shared service transition. Increases in SG&A expenses decreased segment profit by
$23 million primarily in support of revenue growth and increased transportation costs ($5 million). Favorably
impacting SG&A expenses was the reduction in equity-based compensation expense ($14 million).
Clinical Technologies and Services Performance
During fiscal 2008, Clinical Technologies and Services segment revenue grew $203 million or 8%
compared to the prior year. Revenue growth was favorably impacted by new products ($65 million), new
customers ($60 million) and the impact of foreign exchange ($30 million).
Clinical Technologies and Services segment profit increased $111 million or 29% during fiscal 2008
compared to the prior year. Gross margin increased segment profit by $142 million during fiscal 2008 primarily
as a result of revenue growth and a favorable mix of higher margin products (combined impact of $109 million)
and the impact of foreign exchange ($21 million). The year over year impact of Alaris product corrective actions
and recalls negatively impacted gross margin in fiscal 2008 by $8 million. Increases in SG&A expenses
decreased segment profit by $31 million during fiscal 2008. SG&A expenses increased partially due to increased
investment in product quality and research and development costs ($8 million), the impact of foreign exchange
($6 million) and acquisitions ($5 million).
During fiscal 2007, Clinical Technologies and Services segment revenue grew $257 million or 11%.
Revenue growth was favorably impacted by new products ($119 million), increased sales volumes to existing
customers ($90 million) due to renewals and expansion of product lines and new customers ($35 million).
Acquisitions also favorably impacted the year-over-year comparison ($18 million).
Clinical Technologies and Services segment profit increased $65 million or 20% during fiscal 2007
compared to the prior year. Gross margin increased segment profit by $132 million primarily as a result of
revenue growth. Gross margin was negatively impacted by the estimated costs of the Alaris SE pump corrective
action plan and related consulting expenses ($18 million) due to the product recall. Increases in SG&A expenses
decreased segment profit by $67 million in support of the revenue growth and as a result of the impact of
acquisitions ($22 million) and increased investment in product quality and research and development costs
($11 million). Favorably impacting SG&A expenses was the reduction in equity-based compensation expense
($14 million).
Medical Products and Technologies Performance
During fiscal 2008, Medical Products and Technologies segment revenue grew $860 million or 47%
compared to the prior year. Revenue growth for the segment was favorably impacted by the Viasys and Enturia
acquisitions (impact of $680 million and $21 million, respectively), international revenue growth ($100 million),
which includes the impact of foreign exchange ($62 million), increased volume from existing customers ($35
million) and new product launches ($32 million).
Medical Products and Technologies segment profit increased $103 million or 52% during fiscal 2008
compared to the prior year. Gross margin increased segment profit by $383 million during fiscal 2008 primarily
as a result of revenue growth, the Viasys and Enturia acquisitions (impact of $309 million and $10 million,
respectively), the impact of foreign exchange ($27 million) and the correction of a prior year error ($11 million),
as described below. Increases in SG&A expenses negatively impacted segment profit by $280 million during
fiscal 2008 primarily from the impact of the Viasys and Enturia acquisitions (impact of $234 million and $8
million, respectively).
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