Cardinal Health 2009 Annual Report Download - page 61

was adversely impacted by 0.75% due to the non-deductibility of certain special items and impairments,
principally the IPR&D charge related to the Viasys acquisition.
During fiscal 2007, the effective tax rate from continuing operations was favorably impacted by $12
million, or 1%, as a result of various discrete tax adjustments. Included in the $12 million was a favorable
adjustment of $10 million to release tax reserves primarily due to the issuance of a final IRS Revenue Agent
Report that related to fiscal years 2001 and 2002, a favorable adjustment of $9 million to release tax reserves to
reflect an agreement that the Company entered into with the IRS to close federal audit years 1996 through 2000
and an unfavorable adjustment of $7 million to increase tax reserves related to an ongoing international tax audit.
Provision for Income Taxes – Discontinued Operations
The Company’s fiscal 2009 provision for income taxes relative to discontinued operations was an expense
of $9 million. Included within this amount is $5 million related to Martindale, the results of which were
reclassified as discontinued operations.
The Company’s fiscal 2008 provision for income taxes relative to discontinued operations was an expense
of $40 million. Included within this amount was a $28 million increase to unrecognized tax benefits for uncertain
tax positions related to the PTS Business.
Earnings from Discontinued Operations
Earnings from discontinued operations, net of tax, increased by $4 million during fiscal 2009. 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 7 in the “Notes to Consolidated
Financial Statements” for additional information on the Company’s discontinued operations.
Segment Results of Operations
Reportable Segments
During the first quarter of fiscal 2009, the Company reorganized its businesses into three reportable
segments — Healthcare Supply Chain Services, Clinical and Medical Products and All Other — in order to
reduce costs and align resources with the needs of each segment. The Healthcare Supply Chain Services segment
focuses on delivering best-in-class distribution and logistics services to its customers. The segment generates
approximately 94% of the Company’s total segment revenue and approximately 64% of the Company’s total
segment profit (as defined below in the “Segment Results of Operations” section). The Clinical and Medical
Products segment focuses largely on developing innovative products for hospitals and other providers of care.
The segment contributed approximately 32% of the Company’s total segment profit. The All Other segment
franchises and operates apothecary-style retail pharmacies and provides pharmacy services to hospitals and other
healthcare facilities. All prior period segment information has been reclassified to conform to this new financial
reporting presentation.
The Company evaluates the performance of the individual 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. 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 17 of “Notes to Consolidated Financial Statements” for additional information on the
Company’s reportable segments.
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