Cardinal Health 2010 Annual Report Download - page 40

The transaction may have unexpected tax consequences. In connection with the Spin-Off, we received a
p
rivate letter ruling from the IRS to the effect that the contribution by us of the assets of the clinical and medica
l
p
roducts businesses to CareFusion and the distribution of CareFusion shares to our shareholders would qualify as
a tax-free transaction under Sections 3
55
and 368(a)(1)(D) of the Internal Revenue Code (the “Code”). I
n
addition, we received opinions of tax counsel to the effect that the Spin-Off would qualify as a transaction that i
s
described in Sections 3
55
(a) and 368(a)(1)(D) of the Code. The IRS private letter ruling and the opinions o
f
counsel rely on certain facts, assumptions, representations and undertakings from us and CareFusion regarding
the past and future conduct of the companies’ respective businesses and other matters. If any of these facts,
assumptions, representations or undertakings are incorrect or not otherwise satisfied, we and our shareholders
may not be able to rely on the IRS ruling or the opinions of tax counsel. Similarly, the IRS could determine on
audit that the Spin-Off is taxable if it determines that any of the facts, assumptions, representations or
undertakings are not correct or have been violated or if the IRS disagrees with the conclusions in the opinions of
counsel that are not covered by the private letter ruling or for other reasons, including as a result of certai
n
significant changes in stock ownership of either Cardinal Health or CareFusion. If the Spin-Off is determined to
be taxable for U.S. federal income tax purposes, we and our shareholders that are subject to U.S. federal income
tax could incur significant tax liabilities.
We may not be able to capture the full benefits from our minority investment in CareFusion. As of June 30,
2010, we owned approximately 30.
5
million CareFusion shares. As with any investment in a publicly trade
d
company, this investment is subject to risks and uncertainties relating to CareFusion’s business, as disclosed i
n
CareFusion’s filings with the SEC. In addition, we entered into an agreement in connection with the Spin-Off
under which we committed to vote all of our CareFusion shares in proportion to the votes cast by CareFusion’s
o
ther shareholders and we do not have any representation on CareFusion’s Board of Directors. As a result, we ar
e
not able to exert control or influence over CareFusion to act in a manner that we may believe best for protecting
o
r enhancing the value of our investment.
Un
d
er t
h
epr
i
vate
l
etter ru
li
ng
f
rom t
h
e IRS re
l
at
i
ng to t
h
eSp
i
n-O
ff
, we must
di
spose o
f
t
h
e CareFus
i
o
n
s
h
ares as soon as pract
i
ca
bl
ea
f
ter t
h
eSp
i
n-O
ff
an
d
cons
i
stent w
i
t
h
our reasons
f
or reta
i
n
i
ng t
h
es
h
ares,
b
ut no
l
ater t
h
an August 31, 2014. As a resu
l
t, we may
b
e requ
i
re
d
to se
ll
some or a
ll
o
f
t
h
es
h
ares at a t
i
me w
h
en w
e
m
i
g
h
t not ot
h
erw
i
se c
h
oose to
d
o so. A
ddi
t
i
ona
ll
y, any
di
spos
i
t
i
on o
f
CareFus
i
on s
h
ares
b
yus
i
nt
h
epu
bli
c
mar
k
et, or t
h
e percept
i
on t
h
at suc
hdi
spos
i
t
i
ons cou
ld
occur, cou
ld
a
d
verse
l
ya
ff
ect preva
ili
ng mar
k
et pr
i
ces
f
or
CareFus
i
on s
h
ares an
d
a
d
verse
l
ya
ff
ect t
h
eva
l
ue or t
h
e terms an
d
con
di
t
i
ons o
f
suc
hdi
spos
i
t
i
on
.
I
tem
1
B
:
Unresolved Staff Comments
N
ot a
pp
licable
.
I
tem
2
:Pro
p
ert
i
es
I
nt
h
eUn
i
te
d
States, t
h
eP
h
armaceut
i
ca
l
se
g
ment operates 24 p
h
armaceut
i
ca
ldi
str
ib
ut
i
on
f
ac
ili
t
i
es an
d
one
nat
i
ona
ll
o
gi
st
i
cs center;
f
our spec
i
a
l
t
ydi
str
ib
ut
i
on
f
ac
ili
t
i
es; an
d
170 nuc
l
ear p
h
armac
yl
a
b
orator
y,
manufacturin
g
and distribution facilities. The Medical se
g
ment operates 50 medical-sur
g
ical distribution,
assembl
y
, manufacturin
g
, and research operation facilities. Our U.S. operatin
g
facilities are located in 45 states
an
di
n Puerto R
i
co
.
Outside of the United States, through our Medical segment, we own or lease 1
6
manufacturing, distribution
and research operating facilities in Canada, the Dominican Republic, Malaysia, Malta, Mexico, and Thailand
.
We own 65 operating facilities and lease 200 operating facilities. We own two adjoining four-story
b
u
ildi
ngs at 7000 an
d
7200 Car
di
na
l
P
l
ace
i
nDu
bli
n, O
hi
o, w
h
ere our pr
i
nc
i
pa
l
execut
i
ve o
ffi
ces are
h
ea
d
quartere
d.
14