Cardinal Health 2010 Annual Report Download

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2010 Annual Report
is the moment that matters.
is the time to think ahead.
is when we shape the future.

Table of contents

  • Page 1
    2010 Annual Report is the moment that matters. is the time to think ahead. is when we shape the future.

  • Page 2

  • Page 3
    ... what has passed and what is to come. Now is what matters-because it's where we impact care. Now is efficient. Now is cost-effective. Now puts the right tools in the right hands at the right time. Every time. is an exciting time in healthcare- because what we do now helps shape the future of...

  • Page 4
    George S. Barrett Chairman and CEO Cardinal Health, Inc.

  • Page 5
    ... retail pharmacies allowed us to double our growth rate with them, compared to the previous year. We changed our generic sourcing and selling models, creating new value for customers and for our generic partners. At the same time, we worked closely with our branded supplier partners, a number...

  • Page 6
    ... the delivery of healthcare moving to smaller and more disease-specific units of care, we are investing in our ambulatory business to grow our footprint through an expanded sales organization and an enhanced ordering system that supports the unique needs of these customers. Our clinical lab business...

  • Page 7
    ... to be at Cardinal Health. I am proud of the value we bring to our customers and our supplier partners, and I am honored to be part of a team of dedicated employees who make it a reality. I know we can improve the cost-effectiveness of our healthcare system, and our employees are energized around...

  • Page 8

  • Page 9
    a pharmaceutical is changing a life.

  • Page 10
    ... Cardinal Health. We also can help hospital pharmacies reduce their drug spend by recommending generic alternatives to branded medications, when clinically appropriate. Enabling the future of molecular imaging Molecular imaging is one of the most promising areas of development in nuclear medicine...

  • Page 11
    ..., receive and track orders. It's part of our system that targets complete, correct, on-time orders, so pharmacies can spend less time focused on products and more time helping patients. New model for servicing specialty pharmacy needs Through our recent acquisition of Healthcare Solutions Holding...

  • Page 12

  • Page 13
    the supply room is the most important place in the hospital.

  • Page 14
    ... in manufacturing, distribution, sourcing and innovation so we can bring more products to market faster. And we're organizing closer to our customers so we can offer them a new level of service and value. We're using our unique strengths to provide the best, most cost-effective solutions for...

  • Page 15
    ... a patient knowing the supply room is fully stocked. Four hours later, distribution center workers for Cardinal Health are preparing another order of medical products for tomorrow's procedures. Supporting care no matter where it's delivered Right now, the practice of medicine is moving closer to...

  • Page 16

  • Page 17
    quality and cost-effective healthcare don't have to be competing priorities.

  • Page 18
    ... distribution network, we offer resources to help customers increase efficiencies and improve the economics of care, including pharmacy spend, medical product selection and process optimization. Our retail pharmacy customers who use our inventory management, reimbursement accuracy and marketing...

  • Page 19
    ...additional care and litigation costs. We also offer a replenishment service for automated dispensing cabinets (ADMs) in hospitals. We customize refills for each ADM so they can be more quickly and safely replenished with medications that are already in FDAapproved unit-dose, barcoded packaging. This...

  • Page 20
    ... Surgical gowns • Surgical gloves • Masks • Scrubs Surgical drapes Fluid management products Surgical and procedure kits What we offer: • Pharmaceutical distribution services • Medical product distribution services • On-site and remote hospital pharmacy management services • Nuclear...

  • Page 21
    ... imaging. We help ambulatory care sites provide better care. From physician offices to surgery centers and clinical laboratories, we provide products and services that help healthcare professionals focus on their patients. Founded in 1971 32,000+ employees across the globe 17th on Fortune's list...

  • Page 22
    ... Development Stephen T. Falk Executive Vice President, General Counsel and Corporate Secretary Jeffrey W. Henderson Chief Financial Officer Michael C. Kaufmann Chief Executive Officer, Pharmaceutical segment Michael A. Lynch Chief Executive Officer, Medical segment Craig S. Morford Chief Legal...

  • Page 23
    ... Cardinal Health, Inc. Glenn A. Britt (A) Chairman, President and Chief Executive Officer Time Warner Cable Inc. Carrie S. Cox (A) Former Executive Vice President and President of Global Pharmaceuticals Schering-Plough Corp. Calvin Darden (H) Retired Senior Vice President, U.S. Operations United...

  • Page 24
    ... / NON-GAAP RECONCILIATION (in millions, except per Common Share amounts) Restructuring and employee severance Acquisitionrelated costs Impairments and (gain) / loss on sale of assets Litigation (credits) / charges, net Other spinoff costs Gain on sale of CareFusion stock Fiscal year 2010 Operating...

  • Page 25
    ...No Í The aggregate market value of voting stock held by non-affiliates of the registrant on December 31, 2009, based on the closing price on December 31, 2009, was $11,647,605,557. The number of registrant's Common Shares outstanding as of August 18, 2010, was as follows: Common Shares, without par...

  • Page 26
    ...Disagreements With Accountants on Accounting and Financial Disclosure ...Controls and Procedures ...Other Information ...PART III Directors, Executive Officers and Corporate Governance ...Executive Compensation ...Security Ownership of Certain Beneficial Owners and Management and Related Stockholder...

  • Page 27
    ... this Form 10-K (including information incorporated by reference) include "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995, as amended. Many forward-looking statements appear in "Item 7-Management's Discussion and Analysis of Financial Condition...

  • Page 28
    .... We are a global healthcare solutions company providing products and services that help hospitals, physician offices and pharmacies reduce costs, improve safety and productivity, and deliver better care to patients. Except as otherwise specified, information in this Annual Report on Form 10-K is...

  • Page 29
    ... to retail customers (including chain and independent drug stores and pharmacy departments of supermarkets and mass merchandisers), hospitals, and alternate care providers (including mail order pharmacies) located throughout the United States and in Puerto Rico. Pharmaceutical distribution maintains...

  • Page 30
    ... and surgical products are sold directly or through third-party distributors in the United States, Canada, Europe, South America and the Asia/Pacific region. See Note 16 to the "Notes Consolidated Financial Statements" for Medical segment revenue, profit and assets for fiscal 2010, 2009 and 2008. 4

  • Page 31
    ...$3.2 billion in cash; our healthcare marketing services business; and our United Kingdom-based Intercare pharmaceutical distribution business. during fiscal 2010, consummating the Spin-Off of CareFusion Corporation; and selling SpecialtyScripts, LLC and our United Kingdom-based Martindale injectable...

  • Page 32
    ... in the development, manufacturing and distribution of medical and surgical products. We compete on many levels, including service offerings, support services, breadth of product lines, and price. In the Pharmaceutical segment, we compete with two other national, full-line wholesale distributors...

  • Page 33
    ...nuclear pharmacy products and service offerings. We also hold patents relating to medical and surgical products and devices, such as fluid suction and irrigation devices; surgical waste management systems; surgical and medical examination gloves; surgical drapes, gowns and facial protection products...

  • Page 34
    ... the market, correcting the product at the customer location, revising product labeling, and notifying customers. Nuclear pharmacies and related businesses. Our nuclear pharmacies and cyclotron facilities require licenses or permits from the NRC, the radiologic health agency or department of health...

  • Page 35
    ...allow customers to return products that can be added back to inventory and resold at full value, or that can be returned to vendors for credit. We offer market payment terms to our customers. Revenue and Long-Lived Assets by Geographic Area See Note 16 to the "Notes Consolidated Financial Statements...

  • Page 36
    ... with GPO vendor selections. Still, the loss of an agreement with a GPO could cause us to lose customers, which may adversely affect our results of operations and financial condition. Our Pharmaceutical segment's margin may be affected by prices established by manufacturers or market forces that...

  • Page 37
    ... distributors, manufacturers, healthcare providers and pharmacy chains have consolidated; and large, sophisticated purchasing groups have become more prevalent. In March 2010, Congress approved, and the President signed into law, the Patient Protection and Affordable Care Act and the Health Care and...

  • Page 38
    ...numerous distribution centers; receive, process and ship orders on a timely basis; manage the accurate billing and collections for thousands of customers; process payments to suppliers; facilitate the manufacturing and assembly of medical products; and generate financial transactions and information...

  • Page 39
    ..., we may not be able to successfully manage price fluctuations. Our manufacturing businesses use oil, oil-related and other commodities as raw materials in many products. Prices of oil and gas also affect our distribution and transportation costs. Oil and gas prices are volatile and have fluctuated...

  • Page 40
    ...the United States, the Pharmaceutical segment operates 24 pharmaceutical distribution facilities and one national logistics center; four specialty distribution facilities; and 170 nuclear pharmacy laboratory, manufacturing and distribution facilities. The Medical segment operates 50 medical-surgical...

  • Page 41
    ... Executive Officer Chief Financial Officer Chief Executive Officer, Pharmaceutical segment Chief Executive Officer, Medical segment Chief Legal and Compliance Officer Chief Human Resources Officer Executive Vice President, Strategy and Corporate Development Executive Vice President, General Counsel...

  • Page 42
    ... in the United States Attorney's office in Cleveland, Ohio. Ms. Watkins has served as Chief Human Resources Officer and its predecessor position, Executive Vice President-Human Resources, since August 2000. Mr. Blake has served as Executive Vice President, Strategy and Corporate Development since...

  • Page 43
    ... of Equity Securities On August 31, 2009, each shareholder received 0.5 shares of CareFusion common stock for each of our Common Shares held on August 25, 2009, the record date for the Spin-Off. On August 31, 2010, the last trading day before the Spin-Off became effective, the closing price of our...

  • Page 44
    ..., 2010, and reinvestment of dividends (and taking into account the value of CareFusion shares distributed in the Spin-Off). The Value Line Health Care Index investment is weighted on the basis of market capitalization at the beginning of each fiscal year. The companies in the Value Line Health Care...

  • Page 45
    ... financial statements and related notes and "Item 7-Management's Discussion and Analysis of Financial Condition and Results of Operations." 2010 At or for the Fiscal Year Ended June 30, 2009 2008 2007 2006 (1) (In millions, except per common share amounts) Earnings Data: Revenue ...Earnings...

  • Page 46
    ... global company serving the healthcare industry with products and services that help hospitals, physician offices and pharmacies reduce costs, improve safety and productivity, and deliver better care to patients. We report our financial results in two segments: Pharmaceutical and Medical. Our 2010...

  • Page 47
    ...of fiscal 2010, we sold our United Kingdom-based Martindale injectable manufacturing business ("Martindale") for $141 million. Spin-Off of CareFusion Corporation On August 31, 2009, we separated the clinical and medical products businesses from our other businesses through a pro rata distribution to...

  • Page 48
    ...Spin-Off. As of June 30, 2010, we have a $245 million indemnification receivable on our balance sheet related to this item. Results of Operations Revenue Change 2010 2009 2010 Revenue 2009 2008 Pharmaceutical ...2% 11% $89,789.9 $87,862.9 $79,498.3 Medical ...7% 3% 8,750.1 8,159.3 7,916.7 Corporate...

  • Page 49
    ... of the factors listed below. • • Pricing changes on renewed customer contracts (exclusive of the related volume impact) decreased gross margin by $103 million. In fiscal 2009, Medicine Shoppe offered an alternative franchise model to its franchisees to position the franchise system for future...

  • Page 50
    ... margin. Decreased cost of oil, oil-related and other commodities favorably impacted gross margin by $36 million. Fiscal 2009 Compared to Fiscal 2008 Pharmaceutical segment Gross margin increased by $48 million as a result of the factors listed below Pricing changes on renewed customer contracts...

  • Page 51
    ... of the individual segments based upon, among other things, segment profit, which is segment revenue less segment cost of products sold less segment SG&A expenses. We do not allocate restructuring and employee severance, acquisition related costs, impairments and (gain)/loss on sale of assets...

  • Page 52
    ...Earnings In addition to revenue, gross margin and SG&A discussed above, operating earnings were impacted by the following: 2010 2009 2008 Restructuring and Employee Severance ...Acquisition Related Costs ...Impairments and (Gain)/Loss on Sale of Assets ...Litigation (Credits)/Charges, Net ...Fiscal...

  • Page 53
    ...: On September 24, 2009, we completed a debt tender for up to $1.2 billion of certain outstanding debt securities, ultimately purchasing more than $1.1 billion. The offer was funded by a $1.4 billion cash distribution received from CareFusion immediately prior to the SpinOff. In connection with the...

  • Page 54
    ... items. A reconciliation of the provision based on the federal statutory income tax rate to our effective income tax rate from continuing operations is as follows for fiscal 2010, 2009 and 2008 (see Note 9 of "Notes to Consolidated Financial Statements" for a detailed disclosure of the effective...

  • Page 55
    ...last quarter of the reporting period. Chargeback billings are the difference between a product's wholesale acquisition cost and the contract price established between the vendors and the end customer. Fiscal Year Ended June 30, 2010 2009 2008 Days sales outstanding ...Days inventory on hand ...Days...

  • Page 56
    ... 30, 2010. Our ability to access the commercial paper market is limited based on our current credit rating from Moody's Investor Services. Our revolving credit facility and receivables sales facility program require us to maintain a consolidated interest coverage ratio as of any fiscal quarter end...

  • Page 57
    ...through cash provided by operating activities. Fiscal 2011 capital expenditures will be largely focused on information technology projects. Dividends During fiscal 2010, we paid quarterly dividends of $0.175 per share, or $0.70 per share on an annualized basis. On May 5, 2010, our board of directors...

  • Page 58
    ... consolidated financial statements that management believes are the most dependent on estimates and assumptions. For additional accounting policies, see Note 1 of "Notes to Consolidated Financial Statements." Allowance for Doubtful Accounts Trade receivables-amounts owed to us through our operating...

  • Page 59
    ... are assessed annually based on historical losses and economic, business and market trends. In addition, reserves are reviewed quarterly and updated if appropriate. We may adjust the allowance for doubtful accounts if changes in customers' financial condition or general economic conditions...

  • Page 60
    ... below an operating segment. In fiscal 2010, we identified three reporting units: Pharmaceutical segment excluding our nuclear and pharmacy services division, Medical segment and nuclear and pharmacy services division. Fair values can be determined using market, income or cost-based approaches. Our...

  • Page 61
    ...unrecognized tax benefits reflect management's assessment of estimated future taxes to be paid on items in the financial statements. Deferred income taxes arise from temporary differences between financial reporting and tax reporting bases of assets and liabilities, as well as net operating loss and...

  • Page 62
    ... to take into account employee exercise patterns based on changes in our stock price and other variables and it provides for a range of input assumptions. During 2010, we calculated separate option valuations for two separate groups of employees. During fiscal 2009 and 2008, we calculated separate...

  • Page 63
    ... related commodities, including natural gas and electricity through our normal course of business. These exposures result primarily from operating our distribution, manufacturing, and corporate facilities. In certain deregulated markets, we from time to time enter into long-term purchase contracts...

  • Page 64
    ... Report of Independent Registered Public Accounting Firm ...Consolidated Financial Statements and Schedule: Consolidated Statements of Earnings for the Fiscal Years Ended June 30, 2010, 2009 and 2008 ...Consolidated Balance Sheets at June 30, 2010 and 2009 ...Consolidated Statements of Shareholders...

  • Page 65
    ... and schedule are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements and the schedule based on our audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States...

  • Page 66
    ...2010 2009 2008 (In millions, except per common share amounts) Revenue ...Cost of products sold ...Gross margin ...Operating expenses Distribution, selling, general and administrative expenses ...Restructuring and employee severance ...Acquisition related costs ...Impairments and (gain)/loss on sale...

  • Page 67
    CARDINAL HEALTH, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS June 30, June 30, 2010 2009 (In millions) ASSETS Current assets: Cash and equivalents ...Trade receivables, net ...Inventories ...Prepaid expenses and other ...Assets from businesses held for sale and discontinued operations ......

  • Page 68
    ...Unrealized gain on investment in CareFusion, net of tax ...Total comprehensive income ...Employee stock plans activity, including tax expense of $16.1 million ...Treasury shares acquired ...Dividends declared ...Non-cash dividend issued in connection with Spin-off ... (0.1) (141.7) (259.5) (3,689...

  • Page 69
    ... on sale of CareFusion common stock ...Impairments and (gain)/loss on sale of assets ...Share-based compensation ...Provision for deferred income taxes ...Provision for bad debts ...Change in operating assets and liabilities, net of effects from acquisitions: Decrease/(increase) in trade receivables...

  • Page 70
    ... FINANCIAL STATEMENTS 1. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Cardinal Health, Inc., an Ohio corporation formed in 1979, is a global healthcare solutions company providing products and services that help hospitals, physician offices, pharmacies and other healthcare...

  • Page 71
    ... and transaction taxes prior to the Spin-Off. As of June 30, 2010, we have a $244.6 million indemnification receivable on our balance sheet related to this item. Basis of Presentation. Our consolidated financial statements include the accounts of all majority-owned subsidiaries, and all significant...

  • Page 72
    ...Pharmaceutical segment. Percent of Gross Trade Receivables at June 30, 2010 2009 Percent of Revenue 2010 2009 2008 Walgreen Co...CVS Caremark Corporation ... 24% 24% 20% 22% 21% 23% 32% 21% 36% 21% Certain of our businesses have entered into agreements with group purchasing organizations ("GPOs...

  • Page 73
    ... below an operating segment. In fiscal 2010, we identified three reporting units: Pharmaceutical segment excluding our nuclear and pharmacy services division, Medical segment and nuclear and pharmacy services division. Fair values can be determined using market, income or cost-based approaches. Our...

  • Page 74
    ..., 2010 and 2009: June 30, 2010 2009 (in millions) Vendor reserves ... $26.8 $53.6 Accounting for Vendor Incentives. Fees for services and other incentives received from vendors, relating to the purchase or distribution of inventory, are generally reported as a reduction of cost of products sold...

  • Page 75
    ... services related to such merchandise. Revenue for deliveries that are directly shipped to customer warehouses from the manufacturer whereby we act as an intermediary in the ordering and delivery of products is recorded gross in accordance with accounting standards addressing reporting revenue...

  • Page 76
    ... allegations based on their nature and our historical experience with their resolution. Those reserves were not significant in fiscal 2010, 2009 or 2008. Distribution Service Agreement and Other Vendor Fees. Our Pharmaceutical segment recognizes fees received from its distribution service agreements...

  • Page 77
    ...and unvested stock options, restricted shares and restricted share units computed using the treasury stock method. Recent Financial Accounting Standards. In June 2009, the Financial Accounting Standards Board ("FASB") issued new accounting guidance on the accounting for transfers of financial assets...

  • Page 78
    ... ...Total intangible assets acquired ... $ 19.1 25.3 85.0 $129.4 10 10 10 During fiscal 2008, we recorded a charge of $17.7 million related to the write-off of estimated in-process research and development costs ("IPR&D") associated with the Enturia acquisition. The portion of the purchase price...

  • Page 79
    ... 2008 (in millions) Spin-Off (1) ...Segment Realignment (2) ...Medical Headquarters Relocation (3) ... $64.5 2.0 0.1 $73.8 15.7 1.0 $ 0.0 0.2 28.3 (1) During fiscal 2009 and fiscal 2010, we incurred restructuring expenses related to the Spin-Off consisting of employee-related costs, share-based...

  • Page 80
    ... costs related to the retirement of our former Chairman and Chief Executive Officer upon completion of the Spin-Off. (2) During fiscal 2009, we consolidated our businesses into two primary operating and reportable segments to reduce costs and align resources with the needs of each segment ("Segment...

  • Page 81
    ... of the corporate costs previously allocated to CareFusion have been reclassified to the remaining two segments. The following table summarizes the interest expense allocated to discontinued operations for CareFusion during fiscal 2010, 2009 and 2008: Fiscal Year Ended June 30, 2010 2009 2008 (in...

  • Page 82
    ... made at the time of the sale, activity under a transition services agreement and other adjustments. During the fourth quarter of fiscal 2009, we committed to plans to sell the United Kingdom-based Martindale injectable manufacturing business ("Martindale") within our Pharmaceutical segment, and...

  • Page 83
    ... 2010: (in millions) Pharmaceutical Medical Total Balance at June 30, 2008 ...Goodwill acquired, net of purchase price adjustments, foreign currency translation adjustments and other ...Goodwill related to the divestiture or closure of businesses and assets held for sale ...Balance at June 30, 2009...

  • Page 84
    ... shares of CareFusion common stock, resulting in cash proceeds of $270.7 million and a pre-tax realized gain of $44.6 million. (2) Represents our cost investment in the net book value of CareFusion's assets immediately following the Spin-Off adjusted for the sale of securities during fiscal 2010...

  • Page 85
    ...issuance costs, and an offsetting $31.8 million fair value adjustment to the respective debt related to previously terminated interest rate swaps. The debt tender was completed using a portion of the $1.4 billion of cash distributed to us from CareFusion in connection with the Spin-Off. In June 2008...

  • Page 86
    ... provision based on the federal statutory income tax rate to our effective income tax rate from continuing operations is as follows for fiscal 2010, 2009 and 2008: Fiscal Year Ended June 30, 2010 2009 2008 Provision at Federal statutory rate ...State and local income taxes, net of federal benefit...

  • Page 87
    ...): June 30, (in millions) 2010 2009 Deferred income tax assets: Receivable basis difference ...Accrued liabilities ...Share-based compensation ...Loss and tax credit carryforwards ...Deferred tax assets related to uncertain tax positions ...Other ...Total deferred income tax assets ...Valuation...

  • Page 88
    ....7 million of the valuation allowance at June 30, 2010 applies to certain federal, state and international loss carryforwards that, in our opinion, are more likely than not to expire unutilized. However, to the extent that tax benefits related to these carryforwards are realized in the future, the...

  • Page 89
    ... 2009, we received a Revenue Agent's Report for tax years 2003 through 2005, which included new NPA's related to our transfer pricing arrangements between foreign and domestic subsidiaries and the transfer of intellectual property among subsidiaries of an acquired entity prior to its acquisition...

  • Page 90
    ... information about this matter, see our Annual Reports on Form 10-K for fiscal 2008 and 2007. Antitrust Litigation Proceeds In fiscal 2010, we recognized $40.8 million of income resulting from settlement of a class action antitrust claim alleging that a defendant branded pharmaceutical manufacturer...

  • Page 91
    ... 30, 2010 and 2009, notes in the program subject to our guaranty totaled $41.4 million and $39.9 million, respectively. These loans are reported in our consolidated balance sheets. 12. FINANCIAL INSTRUMENTS We utilize derivative financial instruments to manage exposure to certain risks related to...

  • Page 92
    ... instrument and the underlying debt are adjusted to market value at the end of each period with any resulting gain or loss recorded in interest expense, net in the consolidated statements of earnings. During fiscal 2010, we entered into pay-floating interest rate swaps with a total notional value...

  • Page 93
    The following table summarizes the gain/(loss) recognized in earnings for interest rate swaps designated as fair value hedges for fiscal 2010, 2009 and 2008: (in millions) Statements of Earnings Location Fiscal Year Ended June 30, 2010 2009 2008 Pay-floating interest rate swaps ...Fixed-rate debt ...

  • Page 94
    ... December 2013 The following table summarizes the gain/(loss) recognized in earnings for economic (non-designated) derivative instruments for fiscal 2010, 2009 and 2008: (in millions) Statements of Earnings Location Fiscal Year Ended June 30, 2010 2009 2008 Foreign currency contracts ...Fair Value...

  • Page 95
    ...from available market information. The following is a summary of the fair value gain/(loss) of our derivative instruments, based upon the estimated amount that we would receive (or pay) to terminate the contracts as of June 30, 2010 and 2009. The fair values are based on quoted market prices for the...

  • Page 96
    ... and international equity securities. The fair value of these investments is determined using quoted market prices. 14. SHAREHOLDERS' EQUITY At June 30, 2010 and 2009, authorized capital shares consisted of the following: 750 million Class A common shares, without par value; 5 million Class B common...

  • Page 97
    ..., inventory management, data/reporting, new product launch support, and contract and chargeback administration; and maintains prime vendor relationships that streamline the purchasing process resulting in greater efficiency and lower costs for our customers. The Medical segment distributes a broad...

  • Page 98
    ...corporate expenses for shared functions, including corporate management, corporate finance, financial shared services, human resources, information technology, legal and an integrated hospital sales organization. Corporate expenses are allocated to the segments based upon headcount, level of benefit...

  • Page 99
    ... table includes total assets at June 30, 2010 and 2009 for each segment as well as reconciling items necessary to total the amounts reported in the consolidated financial statements: June 30, (in millions) 2010 2009 Segment assets: Pharmaceutical ...Medical ...Corporate (1) ...Consolidated assets...

  • Page 100
    ... recorded within restructuring and employee severance that related to the Spin-Off. The following provides those amounts for fiscal 2010, 2009 and 2008: (in millions) For the Fiscal Year Ended June 30, 2010 2009 2008 Share-based compensation ...Tax benefit ...Total share-based compensation, net of...

  • Page 101
    ...millions, except per share data and years) 2010 2009 2008 Weighted-average grant date fair value per stock option (1) ...Aggregate intrinsic value of exercised options ...Cash received upon exercise ...Cash tax proceeds/(disbursements) realized related to exercise ...Total compensation cost, net of...

  • Page 102
    ...restricted share units is determined by the number of shares granted and the grant date market price of our Common Shares. The following tables summarize all activity related to restricted shares and restricted share units during fiscal 2010 and 2009: Weighted Average Grant Date Fair Value Per Share...

  • Page 103
    ... connection with the Spin-Off, on August 31, 2009, we adjusted share-based compensation awards granted under the Plans into awards based on our Common Shares and/or CareFusion common stock, as applicable. For purposes of the vesting of these equity awards, continued employment or service with us or...

  • Page 104
    ... 30, 2010 2009 2008 Employee retirement savings plans expense ...18. OFF-BALANCE SHEET ARRANGEMENTS $84.3 $72.4 $64.2 We periodically enter into certain off-balance sheet arrangements, primarily receivable sales and operating leases, in order to maximize diversification of funding and return on...

  • Page 105
    ... financial data for fiscal 2010 and 2009. The sum of the quarters may not equal year-to-date due to rounding. (in millions, except per common share amounts) First Quarter Second Quarter Third Quarter Fourth Quarter (1) Fiscal 2010 Revenue ...$24,780.7 $24,919.7 $24,342.8 $24,459.6 Gross margin...

  • Page 106
    ..., except per common share amounts) First Quarter Second Quarter Third Quarter Fourth Quarter (1) Fiscal 2009 Revenue ...Gross margin ...Distribution, selling, general and administrative expenses ...Earnings from continuing operations ...Earnings from discontinued operations ...Net earnings...

  • Page 107
    ... of changes in conditions, or because compliance with the policies or procedures has deteriorated or been circumvented. Management assessed the effectiveness of our internal control over financial reporting as of June 30, 2010. In making this assessment, management used the criteria established in...

  • Page 108
    ..., 2010, based on the COSO criteria. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of Cardinal Health, Inc. and subsidiaries as of June 30, 2010 and 2009, and the related consolidated statements...

  • Page 109
    ... Board of Directors," "Corporate Governance-Director Qualification Standards and Performance Assessment" and "Corporate Governance-Policies on Business Ethics; Chief Legal and Compliance Officer." Information with respect to our executive officers appears in Part I of this report and is incorporated...

  • Page 110
    ... plan at the 2007 Annual Meeting of Shareholders, the 2007 Nonemployee Directors Equity Incentive Plan, and no new awards may be granted under the ODEIP. The ODEIP provides for grants in the form of nonqualified stock options, restricted shares and RSUs to members of the Board who are not employees...

  • Page 111
    ... 2010 Annual Meeting under the captions "Certain Relationships and Related Transactions" and "Corporate Governance-Director Independence." Item 14: Principal Accounting Fees and Services The information called for by this Item 14 is incorporated herein by reference to our Definitive Proxy Statement...

  • Page 112
    ... to Exhibit 3.2 to Cardinal Health's Quarterly Report on Form 10-Q for the quarter ended September 30, 2008, File No. 1-11373) Specimen Certificate for Common Shares of Cardinal Health, Inc. (incorporated by reference to Exhibit 4.01 to Cardinal Health's Annual Report on Form 10-K for the fiscal...

  • Page 113
    ... to Exhibit 10.1.2 to Cardinal Health's Quarterly Report on Form 10-Q for the quarter ended September 30, 2009, File No. 1-11373)* Form of Nonqualified Stock Option Agreement under the Cardinal Health, Inc. 2005 Long-Term Incentive Plan, as amended (grants made to executive officers in August 2006...

  • Page 114
    ... November 5, 2008 (grants made to executive officers in September 2009) (incorporated by reference to Exhibit 10.1.4 to Cardinal Health's Quarterly Report on Form 10-Q for the quarter ended September 30, 2009, File No. 1-11373)* Form of Restricted Share Units Agreement under the Cardinal Health, Inc...

  • Page 115
    ... 10.6 to Cardinal Health's Quarterly Report on Form 10-Q for the quarter ended December 31, 2009, File No. 1-11373)* Form of Nonqualified Stock Option Agreement under the Cardinal Health, Inc. Amended and Restated Equity Incentive Plan, as amended (grant made to executive officer in November 2001...

  • Page 116
    ... Plan, as amended, for installment vesting (grants made to executive officers in April 2005) (incorporated by reference to Exhibit 10.06 to Cardinal Health's Quarterly Report on Form 10-Q for the quarter ended March 31, 2005, File No. 1-11373)* Copy of resolutions adopted by the Human Resources...

  • Page 117
    ...to Exhibit 10.2.2 to Cardinal Health's Quarterly Report on Form 10-Q for the quarter ended September 30, 2009, File No. 1-11373)* Term Sheet for Adjustments to Cardinal Health Stock Options and Terms of CareFusion Stock Options (For current and former U.S. Cardinal Health employees) (incorporated by...

  • Page 118
    ... as amended and restated effective January 1, 2009 (incorporated by reference to Exhibit 10.1 to Cardinal Health's Quarterly Report on Form 10-Q for the quarter ended March 31, 2010, File No. 1-11373)* Cardinal Health, Inc. Global Employee Stock Purchase Plan, as amended and restated effective as of...

  • Page 119
    ...., and Release Agreement effective as of September 1, 2009 by Cardinal Health, Inc. for the benefit of R. Kerry Clark (incorporated by reference to Exhibit 10.3 to Cardinal Health's Quarterly Report on Form 10-Q for the quarter ended September 30, 2009, File No. 1-11373)* Nonqualified Stock Option...

  • Page 120
    ...to Cardinal Health's Current Report on Form 8-K filed on March 6, 2007, File No. 1-11373) Commercial Paper Dealer Agreement, dated August 9, 2006, between Cardinal Health, Inc. and Wachovia Capital Markets, LLC (incorporated by reference to Exhibit 10.04 to Cardinal Health's Annual Report on Form 10...

  • Page 121
    ... 10.3 to Cardinal Health's Quarterly Report on Form 10-Q for the quarter ended March 31, 2010, File No. 1-11373) Omnibus Amendment and Waiver, dated as of December 15, 2009, to the Third Amended and Restated Receivables Purchase Agreement and Waiver, dated as of November 19, 2007 Employee Matters...

  • Page 122
    ... on Form 8-K filed on July 22, 2009, File No. 1-11373) Purchase Agreement, dated July 14, 2009, among CareFusion Corporation, Deutsche Bank Securities Inc., Goldman, Sachs & Co. and UBS Securities LLC (incorporated by reference to Exhibit 10.1 to Cardinal Health's Current Report on Form 8-K filed on...

  • Page 123
    ... financial information regarding Cardinal Health is routinely posted and accessible on the Investors page at www.cardinalhealth.com. In addition, Cardinal Health's website allows investors and other interested persons to sign up to automatically receive email alerts when we post news releases, SEC...

  • Page 124
    ... undersigned, thereunto duly authorized, on August 26, 2010. CARDINAL HEALTH, INC. By: /s/ GEORGE S. BARRETT George S. Barrett Chairman and Chief Executive Officer Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed by the following persons on behalf of...

  • Page 125
    ....9 (1) During fiscal 2010, 2009 and 2008 recoveries of amounts provided for or written off in prior years were $1.0 million, $0.5 million and $3.1 million, respectively. (2) Write-off of uncollectible accounts. (3) Amounts included herein pertain to the continuing operations of Cardinal Health. 99

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  • Page 129
    ...record. Annual meeting The 2010 Annual Meeting of Shareholders will be held at 2 p.m. Eastern Daylight Time on November 3, 2010, at Cardinal Health headquarters in Dublin, Ohio. Shareholders are cordially invited to attend. Auditors Ernst & Young LLP Financial information Comprehensive financial and...

  • Page 130
    ... Health. All rights reserved. CARDINAL HEALTH, the Cardinal Health LOGO and Essential to care are trademarks or registered trademarks of f Cardinal Health. All other marks are the property of f their respective owners. Lit. No. 5MC1526-02 (09/2010) Cardinal Health 7000 Cardinal Place Dublin, Ohio...