Cardinal Health 2010 Annual Report Download - page 54

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Provision
f
or Income Taxes
Genera
ll
y,
fl
uctuat
i
ons
i
nt
h
ee
ff
ect
i
ve tax rate are
d
ue to c
h
anges w
i
t
hi
n
i
nternat
i
ona
l
an
d
U.S. stat
e
e
ff
ect
i
ve tax rates resu
l
t
i
ng
f
rom our
b
us
i
ness m
i
xan
ddi
screte
i
tems. A reconc
ili
at
i
on o
f
t
h
e prov
i
s
i
on
b
ase
d
on
t
h
e
f
e
d
era
l
statutory
i
ncome tax rate to our e
ff
ect
i
ve
i
ncome tax rate
f
rom cont
i
nu
i
ng operat
i
ons
i
sas
f
o
ll
ows
f
o
r
fi
sca
l
2010, 2009 an
d
2008
(
see Note 9 o
f
“Notes to Conso
lid
ate
d
F
i
nanc
i
a
l
Statements”
f
or a
d
eta
il
e
ddi
sc
l
osur
e
of
t
h
ee
ff
ect
i
ve tax rate reconc
ili
at
i
on
):
F
i
scal Year Ended June 30
,
2
0
1
0
2
009
2
008
Provision at Federal statutory rate
...........................................
3
5
.0% 3
5
.0% 3
5
.0%
State and local income taxes, net of federal benefi
t
.............................
4
.7
1
.
84
.
4
Foreign tax rate differentia
l
................................................
(2
.
0) (3
.
8) (
7.
2)
U
nremitted foreign earnings and capital gain from repatriation
....................
13
.
90
.
03
.
7
Valuation allowances
.....................................................
(2
.
3) (3
.
1) (3
.7
)
Other .................................................................
2
.
34
.7
2
.
4
E
ff
ect
iv
e
i
ncome tax rate
..................................................
5
1.
6
%
3
4.
6
%
3
4.
6
%
F
iscal 2010 Com
p
ared to Fiscal 200
9
The effective tax rate was unfavorably impacted by a charge of
$
168 million, or 13.9 percentage points
,
attr
ib
uta
bl
e to earn
i
ngs no
l
onger
i
n
d
e
fi
n
i
te
l
y
i
nveste
d
o
ff
s
h
ore. T
h
e
fi
sca
l
2010 e
ff
ect
i
ve tax rate was a
l
s
o
un
f
avora
bl
y
i
mpacte
db
y 1.8 percentage po
i
nts
d
ue to c
h
anges
i
n our
b
us
i
ness m
i
xw
hi
c
h
resu
l
te
di
na
hi
g
h
e
r
p
ercentage o
f
our pretax
i
ncome
b
e
i
ng generate
di
nt
h
e U.S. t
h
an
i
n
l
ower tax rate
i
nternat
i
ona
lj
ur
i
s
di
ct
i
ons.
A
f
avora
bl
eau
di
t sett
l
ement w
i
t
h
a state tax
i
ng aut
h
or
i
ty
i
n
fi
sca
l
2009 (see
b
e
l
ow) a
l
so un
f
avora
bl
y
i
mpacte
d
t
h
e
y
ear-over-year compar
i
son o
f
t
h
ee
ff
ect
i
ve tax rate
.
F
iscal 2009 Com
p
ared to Fiscal 2008
T
h
ee
ff
ect
i
ve tax rate was un
f
avora
bl
y
i
mpacte
db
y 3.4 percentage po
i
nts
d
ue to c
h
anges
i
n our
b
us
i
ness
m
i
xw
hi
c
h
resu
l
te
di
na
hi
g
h
er percentage o
f
our pretax
i
ncome
b
e
i
ng generate
di
nt
h
e U.S t
h
an
i
n
l
ower tax rat
e
i
nternat
i
ona
lj
ur
i
s
di
ct
i
ons. T
h
ee
ff
ect
i
ve tax rate was
f
avora
bl
y
i
mpacte
db
y 1.4 percentage po
i
nts
d
ue to an au
dit
sett
l
ement w
i
t
h
a state tax
i
ng aut
h
or
i
ty. In a
ddi
t
i
on, t
h
ee
ff
ect
i
ve tax rate was
f
avora
bl
y
i
mpacte
db
y 3.1
p
ercentage po
i
nts
d
ue to t
h
ere
l
ease o
f
ava
l
uat
i
on a
ll
owance on a
d
e
f
erre
d
tax asset esta
bli
s
h
e
df
or a cap
i
ta
ll
oss
carry
f
orwar
d
.
Ongoing Au
d
it
s
The IRS currentl
y
has on
g
oin
g
audits of fiscal
y
ears 2001 throu
g
h 2007. We have received proposed
ad
j
ustments from the IRS related to our transfer pricin
g
arran
g
ements between forei
g
n and domestic subsidiarie
s
and the transfer of intellectual propert
y
amon
g
subsidiaries of an acquired entit
y
prior to its acquisition b
y
us.
T
he IRS proposed additional taxes of $598 million, excludin
g
penalties and interest. If this tax ultimatel
y
must be
p
aid, CareFusion is liable under the tax matters a
g
reement for $462 million of the total amount. We disa
g
ree wit
h
these proposed ad
j
ustments and intend to vi
g
orousl
y
contest them, but we believe our reserves for these matter
s
are ade
q
uate.
Earnings from Discontinued Operation
s
E
arnin
g
s from discontinued operations were $55 million for fiscal 2010. CareFusion operatin
g
results are
included within earnin
g
s from discontinued operations for all periods throu
g
h the date of the Spin-Off. Earnin
g
s
f
rom discontinued operations, net of tax, decreased b
y
$60 million durin
g
fiscal 2009 primaril
y
because
CareFusion’s earnin
g
s declined—in lar
g
e part because hospitals deferred capital spendin
g
. See Note 5 in th
e
“Notes to Consolidated Financial Statements” for additional information on discontinued o
p
erations
.
28