Cardinal Health 2009 Annual Report Download - page 126

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(3) The All Other segment’s revenue is derived from three main product categories. These product categories
and their respective contributions to revenue are as follows:
Fiscal Year Ended June 30,
Product Category 2009 2008 2007
Pharmacy services ....................................................... 83% 75% 85%
Franchising and operating apothecary-style retail pharmacies ..................... 16% 18% 15%
Medical access and specialty products ....................................... 1% 7% — %
Total .............................................................. 100% 100% 100%
(4) Corporate revenue primarily consists of the elimination of inter-segment revenue.
The Company evaluates the performance of the segments based upon, among other things, segment profit.
Segment profit is segment revenue less segment cost of products sold, less segment SG&A expenses. Segment
SG&A expense includes equity compensation expense as well as allocated corporate expenses for shared
functions, including corporate management, corporate finance, financial shared services, human resources,
information technology, legal and legislative affairs and an integrated hospital sales organization. Corporate
expenses are allocated to the segments based upon headcount, level of benefit provided and ratable allocation.
Information about interest income and expense and income taxes is not provided at the segment level. In
addition, special items and impairments, (gain)/loss on sale of assets and other, net are not allocated to the
segments. See Note 3 for further discussion of the Company’s special items and impairments, (gain)/loss on sale
of assets and other, net. The accounting policies of the segments are the same as those described in the summary
of significant accounting policies in Note 1.
The following table includes segment profit by reportable segment and reconciling items necessary to agree
to consolidated operating earnings in the consolidated financial statements:
Segment Profit
Fiscal Year Ended June 30,
(in millions) 2009 2008 2007
Segment profit:
Healthcare Supply Chain Services (1) ............................. $1,338.8 $1,333.5 $1,521.0
Clinical and Medical Products (1)(2) .............................. 669.6 734.9 535.1
All Other (1) ................................................. 95.3 100.5 106.8
Total segment profit ........................................... 2,103.7 2,168.9 2,162.9
Corporate (1) (3) .............................................. (218.0) (77.4) (816.1)
Total consolidated operating earnings ................................. $1,885.7 $2,091.5 $1,346.8
(1) The Company has encouraged its segments to identify investment projects which will provide future returns.
These projects typically require incremental strategic investments in the form of additional capital or
operating expenses. Investment spending previously held at corporate has been allocated to the segments
under the new segment structure. Prior period information has been reclassified to conform to this new
presentation.
(2) During the fourth quarter of fiscal 2008, the Company discovered it had failed to recognize a portion of
profit on sales pertaining to prior years. The error resulted from system interface and reconciliation
discrepancies over a period of several years. As a result, the Company recorded income of approximately
$11.1 million in fiscal 2008 of which $7.4 million pertained to fiscal 2007. In connection with this matter,
the Company implemented an action plan that has addressed the issues related to the error.
(3) For fiscal years ended June 30, 2009, 2008 and 2007, Corporate includes, among other things, special items
and impairments, (gain)/loss on sale of assets and other, net, which are not allocated to the segments.
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