Cardinal Health 2009 Annual Report Download - page 72

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During fiscal 2007, the Company repurchased approximately $3.8 billion of its Common Shares. The
Company’s fiscal 2007 Common Share repurchases represented 54 million shares at an average price per share of
$69.79.
On August 5, 2009, the Company announced a new $500 million share repurchase program which expires
on August 31, 2012. The Company expects to use this repurchase program to offset equity plan issuances.
See “Issuer Purchases of Equity Securities” within “Item 5—Market for Registrant’s Common Equity,
Related Stockholder Matters and Issuer Purchases of Equity Securities” for further information regarding the
Company’s most recent share repurchase programs.
Capital Resources
The Company’s cash and equivalents balance was $1.8 billion at June 30, 2009 compared to $1.3 billion at
June 30, 2008. The cash balance at June 30, 2009 was increased by net cash provided by operating activities of
$1.6 billion, which was driven by earnings described above, and decreased by the July 2008 repayment of $150
million of 6.25% notes due 2008, repayment of $149 million for the preferred debt securities (see discussion
below for further information) in October 2008 and capital spending and dividends.
The Company’s cash and equivalents balance as of June 30, 2009 included $906 million of cash held by its
subsidiaries outside of the United States (of which approximately two-thirds related to CareFusion). Although the
vast majority of cash held outside the United States is available for repatriation, doing so could subject it to U.S.
federal, state and local income tax. The U.S. parent of the Company may temporarily access cash held by foreign
subsidiaries without subjecting it to U.S. federal income tax through intercompany loans. A notice issued by the
IRS in October 2008 announced that the U.S. Treasury Department will issue regulations that will, for a
temporary period, extend the permitted duration of such intercompany loans that qualify for suspended deemed
dividend treatment under Section 956 of the Code. Such intercompany loans from foreign subsidiaries to the U.S.
parent must be repaid within 60 days from commencement and cannot exceed 180 cumulative days during the
year. At June 30, 2009 and 2008, the Company did not have any outstanding intercompany loan balance under
Section 956. The position set forth in the notice will apply for the Company until June 30, 2010. Not included in
the previously disclosed cash held by subsidiaries outside of the United States, is an intercompany loan of $852
million from the Company’s international Accounts Receivable and Financing entity (see below for discussion of
this entity), which is due by fiscal 2012.
In addition to cash, the Company’s sources of liquidity include a $1.5 billion commercial paper program
backed by a $1.5 billion revolving credit facility and a committed receivables sales facility program with the
capacity to sell $950 million in receivables (on May 1, 2009, the Company amended its committed receivables
sales facility program to increase the purchase limit from $850 million to $950 million). The Company had no
outstanding borrowings from the commercial paper program at June 30, 2009. Due to general market
conditions, market demand for the Company’s A-2, P-2 and F2-rated commercial paper during the six months
ended December 31, 2008 was limited; however, the market has improved since the end of the second quarter of
fiscal 2009, and the Company issued up to $400 million of commercial paper during the second half of fiscal
2009. With the announcement of the Spin-Off, the Company’s commercial paper was downgraded to P-3 by
Moody’s. The short-term ratings downgrade by Moody’s, triggered by the Spin-Off, may diminish the
Company’s ability to gain access to the commercial paper market, but the Company believes that it will be able
to, in such event, utilize alternative sources of credit that are available to the Company.
The Company terminated certain fixed-to-floating interest rate swaps and received settlement proceeds
totaling $123 million on March 24, 2009. The proceeds are classified as cash provided by operating activities in
the consolidated statements of cash flows. There was no immediate impact to the statement of earnings; however,
the fair value adjustment to debt will be amortized over the life of the underlying debt as a reduction to interest
expense.
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