Cardinal Health 2011 Annual Report Download - page 50

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• Increased margin from branded pharmaceutical sales (exclusive of the related volume impact) had
a
p
ositive impact on gross margin of
$
38 million despite the adverse timing impact of the transition of a
s
i
g
nificant vendor relationship to a distribution service a
g
reement.
• Sales volume
g
rowth in pharmaceutical distribution had a positive impact of $22 million
.
• Within nuclear pharmac
y
, for fiscal 2010, the ne
g
ative impact of the isotope suppl
y
shorta
g
e was
largely offset by the use of alternative isotopes and the favorable impact of cost of materials saving
s
f
rom convers
i
on to gener
i
c pro
d
ucts. However, t
h
ere was a negat
i
ve
i
mpact
i
nt
h
e secon
dh
a
lf
o
f
t
he
y
ear due to the severe shorta
g
es we experienced durin
g
that period.
• The favorable impact of various
g
eneric pharmaceutical product pro
g
rams in pharmaceutica
l
distribution was partially offset by lower generic margins due to timing and value of new generi
c
l
aunc
h
es
.
M
edical segment
Gross mar
g
in increased $95 million in fiscal 2010 as a result of the factors listed below
.
• Increased sales volume resulted in a $67 million increase in
g
ross mar
g
in
.
• Decreased cost of oil-based resins and other commodities favorabl
y
impacted
g
ross mar
g
in b
y
$3
6
m
illion
.
• A one-time gain of
$
14 million as a result of the recognition of previously deferred intercompany
r
e
v
enue
f
or sa
l
es to
C
areFus
i
on
.
D
istribution, Selling, General and Administrative Expenses (“SG&A”
)
C
han
g
e
SG
&
A
(
in millions, except growth rates
)
20
11
20
1
0
2
0
1
1
2
0
1
0
2
009
SG&A ................................................ 8% 3%
$
2,594.8
$
2,408.0
$
2,333.
5
F
isca
l
2011 Com
p
are
d
to Fisca
l
201
0
T
he increase in SG&A in fiscal 2011 was primarily due to acquisitions, net of divestitures (
$
147 million),
which included amortization of acquisition-related intangible assets of
$
67 million and
$
10 million for fisca
l
2011 and 2010, respectivel
y
. SG&A also included costs related to the Spin-Off of $10 million and $11 million
f
or fiscal 2011 and 2010, respectively.
F
isca
l
2010 Com
p
are
d
to Fisca
l
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
com
p
ensation. In fiscal 2010, we had incentive com
p
ensation accruals that were $46 million above
p
lan due to
better than ex
p
ected consolidated
p
erformance com
p
ared with incentive com
p
ensation accruals that were
$
36
million below plan in fiscal 2009. In addition, we incurred increased spending on strategic projects (
$
51 million)
.
SG&A expense
g
rowth was si
g
nificantl
y
miti
g
ated b
y
cost control measures instituted in fiscal 2009 and reduced
bad debt ex
p
ense (
$
25 million). SG&A also included
$
11 million and
$
5 million of costs related to the S
p
in-Of
f
f
or
fi
sca
l
2010 an
d
2009, respect
i
ve
l
y.
24