Cardinal Health 2010 Annual Report Download - page 30

addition, sales to bulk customers in aggregate generate higher segment cost of products sold as a percentage o
f
r
evenue than sales to non-bulk customers, because bulk customers’ orders consist almost entirely of higher cos
t
branded products. The higher segment cost of products sold as a percentage of revenue for bulk customers is also
driven by the impact of branded manufacturer margin and manufacturer cash discounts. Branded manufacture
r
margin is lower due to the shorter time that products sold to bulk customers are held in inventory by us, allowin
g
less opportunity for pharmaceutical price appreciation. Segment distribution, selling, general and administrative
(“SG&A”) expenses as a percentage of revenue from bulk customers are substantially lower than from non-bulk
customers because deliveries to bulk customers require substantially fewer services to be rendered by us tha
n
deliveries to non-bulk customers
.
The following table shows the revenues, segment expenses, segment profit and segment profit as
a
p
ercentage of revenue for bulk and non-bulk customers for fiscal 2010, 2009 and 2008.
(
in millions
)
20
1
0
2009
(
2
)
2
008
(
2
)
Non-bulk customers:
Revenue from non-bulk customer
s
.............................
$
45,795.4
$
44,134.7
$
42,199.
7
S
egment expenses allocated to non-bulk customers (1
)
.............
44,908.4 43,272.9 41,33
5
.
6
S
egment profit from non-bulk customers (1)
.....................
887.0 861.8 864.1
S
egment profit from non-bulk customers as a percentage of revenue
f
rom non-bulk customers (1)
................................
1.
9
4% 1.
95
% 2.0
5%
B
ulk customers
:
Revenue from bulk customers
.................................
$
43,994.5
$
43,728.2
$
37,298.6
S
egment expenses allocated to bulk customers (1
)
.................
43,879.7 43,
55
4.3 37,140.3
S
egment profit from bulk customers (1
)
.........................
1
14.8 173.
9
1
5
8.3
S
egment profit from bulk customers as a percentage of revenue from
bulk customers (1)
........................................
0.26% 0.40% 0.42
%
(1) Se
g
ment expenses an
d
pro
fi
t requ
i
re
d
comp
l
ex an
d
su
bj
ect
i
ve est
i
mates an
d
a
ll
ocat
i
ons
b
ase
d
upon
assumpt
i
ons, past exper
i
ence an
dj
u
dg
ment t
h
at we
b
e
li
eve are reasona
bl
e. In a
ddi
t
i
on, amounts
d
ono
t
i
nc
l
u
d
et
h
e
i
mpact o
fl
ast-
i
n,
fi
rst-out (“LIFO”) prov
i
s
i
ons,
if
an
y
.We
h
a
d
no LIFO prov
i
s
i
ons
i
n
fi
sca
l
2
010, 2009 an
d
2008.
(2) Dur
i
n
gfi
sca
l
2010, we rev
i
se
d
some o
f
t
h
e est
i
mates use
d
w
h
en a
ll
ocat
i
n
g
expenses
b
etween non-
b
u
lk
customers an
db
u
lk
customers. Pr
i
or per
i
o
di
n
f
ormat
i
on
h
as
b
een a
dj
uste
d
to re
fl
ect t
hi
sc
h
an
g
e
.
S
ee Note 1
6
to the “Notes Consolidated Financial Statements” for Pharmaceutical se
g
ment revenue, profi
t
an
d
assets
f
or
fi
sca
l
2010, 2009 an
d
2008
.
Me
d
ica
l
Se
g
men
t
T
h
eMe
di
ca
l
se
g
ment
di
str
ib
utes a
b
roa
d
ran
g
eo
f
me
di
ca
l
, sur
gi
ca
l
an
dl
a
b
orator
y
pro
d
ucts to
h
osp
i
ta
l
s,
sur
g
er
y
centers,
l
a
b
orator
i
es, p
hy
s
i
c
i
an o
ffi
ces an
d
ot
h
er
h
ea
l
t
h
care prov
id
ers. T
hi
sse
g
ment a
l
so
d
eve
l
ops,
manufactures and sources our own line of medical and sur
g
ical products. These products include: sterile and
non-sterile procedure kits; sin
g
le-use sur
g
ical drapes,
g
owns and apparel; exam and sur
g
ical
g
loves; and fluid
suction and collection s
y
stems. Our medical and sur
g
ical products are sold directl
y
or throu
g
h third-part
y
distributors in the United States, Canada, Europe, South America and the Asia/Pacific re
g
ion.
S
ee Note 1
6
to the “Notes Consolidated Financial Statements” for Medical se
g
ment revenue, profit an
d
assets for fiscal 2010, 2009 and 2008
.
4