Cardinal Health 2010 Annual Report Download - page 50

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• Within nuclear pharmacy, for fiscal 2010, the negative impact of the isotope supply shortage was
l
argely offset by the use of alternative isotopes and the favorable impact of cost of materials savings
f
rom conversion to generic products. However, there was a negative impact in the second half of the
y
ear due to the severe shortages we experienced during that period.
•T
h
e
f
avora
bl
e
i
mpact o
f
var
i
ous
g
ener
i
cp
h
armaceut
i
ca
l
pro
d
uct pro
g
rams
i
np
h
armaceut
i
ca
l
di
str
ib
ut
i
on was part
i
a
lly
o
ff
set
by l
ower
g
ener
i
c mar
gi
ns
d
ue to t
i
m
i
n
g
an
d
va
l
ue o
f
new
g
ener
ic
l
aunc
h
es
.
Medical segment
Gross mar
g
in increased $95 million as a result of the factors listed below
.
• Increased sales volume resulted in a
$
67 million increase in gross margin
.
• Decreased cost of oil, oil-related and other commodities favorably impacted gross margin by
$
3
6
m
illion.
F
isca
l
2009 Compare
d
to Fisca
l
2008
Pharmaceutical segment
Gross mar
g
in increased b
y
$48 million as a result of the factors listed below.
•Pr
i
c
i
n
g
c
h
an
g
es on renewe
d
customer contracts (exc
l
us
i
ve o
f
t
h
ere
l
ate
d
vo
l
ume
i
mpact)
d
ecrease
d
g
ross mar
g
in b
y
$132 million.
• Higher sales volume, mainly as a result of growth in pharmaceutical distribution, increased gros
s
m
argin by
$
122 million.
• Timin
g
of new
g
eneric pharmaceutical launches resulted in hi
g
her
g
eneric mar
g
ins of $69 million.
Medical segment
Gross mar
g
in decreased $69 million as a result of the factors listed below
.
• The hi
g
her cost of oil, oil-related and other commodities decreased
g
ross mar
g
in b
y
$34 million.
• The negative impact of foreign exchange impacted gross margin by
$
32 million.
D
istribution, Selling, General and Administrative Expenses (“SG&A”
)
C
han
ge
S
G&A
201
0
2
009 201
0
200
9
2008
SG&
A
.
..............................................
3%
—
%
$
2
,
408.0
$
2
,
333.5
$
2
,
340.
6
F
iscal 2010 Com
p
ared to Fiscal 200
9
I
ncrease
d
SG&A
d
ur
i
ng
fi
sca
l
2010 was pr
i
mar
il
y
d
ue to an
i
ncrease
i
n our management
i
ncent
i
v
e
compensation. In fiscal 2010, we had incentive compensation accruals that were $46 million above plan due to
better than expected consolidated performance compared with incentive compensation accruals that were $36
million below plan in fiscal 2009. In addition, we incurred increased spendin
g
on strate
g
ic pro
j
ects ($51 million)
.
SG&A expense
g
rowt
h
was s
ig
n
ifi
cant
ly
m
i
t
ig
ate
dby
cost contro
l
measures
i
nst
i
tute
di
n
fi
sca
l
2009 an
d
re
d
uce
d
bad debt expense ($25 million). Included within SG&A were $11 million and $5 million of costs related to the
Sp
i
n-O
ff f
or
fi
sca
l
2010 an
d
2009, respect
i
ve
ly
.
24