Cardinal Health 2009 Annual Report Download - page 43

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The Company’s future results of operations are subject to the availability and fluctuations in the costs of
purchased components, compounds, raw materials and energy.
The Company depends on various components, compounds, raw materials and energy (including
radioisotopes, oil and natural gas and their derivatives) supplied by others for its operations. It is possible that
any of the Company’s supplier relationships could be interrupted due to natural disasters or other events or could
be terminated in the future. Any sustained interruption in the Company’s receipt of adequate supplies could have
an adverse effect on the Company. In addition, while the Company has processes to minimize volatility in
component and material pricing, no assurance can be given that the Company will be able to successfully manage
price fluctuations or that future price fluctuations or shortages will not have an adverse effect on the Company’s
results of operations.
The Company’s manufacturing businesses use petroleum-based materials as raw materials in many of their
products. Prices of oil and gas also affect the Company’s distribution and transportation costs. Oil and gas prices
are volatile and have increased in recent years, resulting in higher costs to the Company to produce and distribute
its products. Due to the highly competitive nature of the healthcare industry and the cost-containment efforts of
the Company’s customers and third party payors, the Company may be unable to pass along cost increases
through higher prices. If costs increase in the future and the Company is unable fully to offset these increases
through other cost reductions or recover these costs through price increases or fuel surcharges, the Company’s
results of operations and financial condition could be adversely affected.
The Company’s global operations are subject to a number of economic, political and regulatory risks.
The Company conducts its operations in various regions of the world outside of the United States, including
countries in North America, South America, Europe, the Middle East, Africa and Asia. Global economic and
regulatory developments affect businesses such as the Company’s in many ways. The Company’s global
operations are affected by local economic environments, including inflation, recession, currency volatility, and
global competition. Political changes, some of which may be disruptive, can interfere with the Company’s supply
chain and customers and all of its activities in a particular location. While some of these risks can be hedged
using derivatives or other financial instruments and some of these other risks may be insurable, such attempts to
mitigate these risks are costly and not always successful.
Additionally, the Company’s global operations are also subject to risks arising from violations of U.S. laws
such as the U.S. Foreign Corrupt Practices Act and similar anti-bribery laws in other jurisdictions, and various
export control and trade embargo laws and regulations, including those which may require licenses or other
authorizations for transactions relating to certain countries and/or with certain individuals identified by the U.S.
government. If the Company fails to comply with applicable laws and regulations, it could suffer civil and
criminal penalties that could adversely affect the Company’s results of operations and financial condition.
Risks associated with the Spin-Off of CareFusion.
The Company’s planned Spin-Off of CareFusion is subject to a number of risks, including the following:
•Risk of Non-Consummation. The Company expects the distribution of 80.1% or more of CareFusion
shares of common stock to occur after the close of trading on August 31, 2009. However, the Spin-Off
remains subject to conditions, including: (i) the private letter ruling that the Company received from
the IRS not being revoked or modified in any material respect; (ii) the receipt of opinions from counsel
to the Company to the effect that the contribution and distribution will qualify as a transaction that is
described in Sections 355(a) and 368(a)(1)(D) of the Code; (iii) no rating agency action that is likely to
result in either the Company or CareFusion being downgraded below investment grade; and (iv) the
making of a cash distribution from CareFusion to the Company prior to the distribution. There can be
no assurance that any or all of these conditions will be met and that the Spin-Off will be completed in
the manner and timeframe currently contemplated, or at all.
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