Cardinal Health 2009 Annual Report Download - page 105

Lived Assets.” In accordance with SFAS No. 144 and EITF Issue No. 03-13, “Applying the Conditions in
Paragraph 42 of FASB Statement No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets, in
Determining Whether to Report Discontinued Operations,” the operating results of the PTS business were
reclassified to discontinued operations for all periods presented.
During the fourth quarter of fiscal 2007, the Company completed the sale of the PTS Business. At the
closing of the 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. The Company
recognized an after-tax book gain of approximately $1.1 billion during the fiscal year ended June 30, 2007 from
this transaction. The Company incurred activity during the fiscal year ended June 30, 2008 as a result of changes
in certain estimates made at the time of the sale, activity under transition service agreements and other
adjustments. Also included within the year ended June 30, 2008, was an adjustment for a deferred tax item which
should not have been included in the book basis of the PTS Business when it was sold in the fourth quarter of
fiscal 2007. This adjustment resulted in a $12.3 million increase in the gain on sale of the PTS Business. During
the fiscal year ended June 30, 2009, the Company incurred activity as a result of certain minor adjustments
pertaining to deferred taxes.
The results of the PTS Business included in discontinued operations for fiscal years ended June 30, 2009,
2008 and 2007 are summarized as follows:
Fiscal Year Ended
June 30,
(in millions) 2009 2008 2007
Revenue ............................................................. $— $ — $1,344.8
Operating income/(loss) before taxes ....................................... — (2.0) 98.9
Income tax expense .................................................... (3.7) (5.7) (23.5)
Operating income/(loss) after tax .......................................... (3.7) (7.7) 75.4
Gain/(loss) from sale, net of tax expense of $26.2 million and $16.3 million for 2008
and 2007, respectively ................................................ — (7.6) 1,072.4
Earnings/(loss) from discontinued operations ................................ (3.7) (15.3) 1,147.8
Comprehensive income/(loss) from discontinued operations .................... (3.7) (15.3) 1,178.9
The net periodic benefit cost included in discontinued operations for the PTS Business was $22.9 million for
fiscal 2007.
Interest expense allocated to discontinued operations for the PTS Business was $25.0 million for fiscal
2007. Interest expense was allocated based upon a ratio of the invested capital of the PTS Business versus the
overall invested capital of the Company. In addition, a portion of the corporate costs previously allocated to the
PTS Business were reclassified to the remaining segments.
In accordance with EITF Issue No. 93-7, “Recognition of Deferred Tax Assets for a Parent Company’s
Excess Tax Basis in the Stock of a Subsidiary That is Accounted for as a Discontinued Operation,” during the
second quarter of fiscal 2007, the Company recognized a $425.0 million net tax benefit related to the difference
between the Company’s tax basis in the stock of the various PTS businesses included in discontinued operations
and the book basis of the Company’s investment in those businesses. This tax benefit was offset by the related
tax expense on the gain over net book value in the fourth quarter of fiscal 2007 upon completion of the sale of the
PTS Business.
The liabilities related to the sale of the PTS Business included in liabilities held for sale and discontinued
operations were $1.4 million and $2.5 million at June 30, 2009 and 2008, respectively.
Cash flows generated from the discontinued operations are presented separately on the Company’s
consolidated statements of cash flows.
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