Cardinal Health 2014 Annual Report Download - page 48

Cardinal Health, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
46
evaluates our performance combined with the nature of the
individual business activities.
The Pharmaceutical segment distributes branded and generic
pharmaceutical, specialty pharmaceutical, over-the-counter
healthcare and consumer products in the United States. This
segment also operates nuclear pharmacies and cyclotron
facilities, provides pharmacy services to hospitals and other
healthcare facilities, and provides services to healthcare
companies supporting the marketing, distribution and payment
for specialty pharmaceutical products. Through our Cardinal
Health China division, this segment imports and distributes
pharmaceuticals, over-the-counter healthcare and consumer
products as well as provides specialty pharmacy and other
services in China.
The Medical segment distributes a broad range of medical,
surgical and laboratory products to hospitals, ambulatory
surgery centers, clinical laboratories, physician offices and other
healthcare providers in the United States, Canada and China
and to patients in the home in the United States. This segment
also manufactures, sources and develops its own line of private
brand medical and surgical products. Our medical and surgical
products are sold directly or through third-party distributors in
the United States, Canada, Europe and other regions
internationally.
The following table presents revenue for each reportable
segment and Corporate:
(in millions) 2014 2013 2012
Pharmaceutical (1) $ 80,110 $ 91,097 $ 97,925
Medical 10,962 10,060 9,642
Total segment revenue 91,072 101,157 107,567
Corporate (2) 12 (64) (15)
Total revenue $ 91,084 $ 101,093 $ 107,552
(1) Our pharmaceutical distribution contract with Walgreens expired on
August 31, 2013. Our pharmaceutical distribution contract with Express
Scripts, Inc. expired on September 30, 2012.
(2) Corporate revenue consists of the elimination of inter-segment revenue
and other revenue not allocated to the segments.
We evaluate segment performance based upon segment profit,
among other measures. Segment profit is segment revenue,
less segment cost of products sold, less segment SG&A
expenses. Segment SG&A expenses include share-based
compensation expense as well as allocated corporate expenses
for shared functions, including corporate management,
corporate finance, financial and customer care shared services,
human resources, information technology and legal. Corporate
expenses are allocated to the segments based upon headcount,
level of benefit provided and other ratable allocation
methodologies. Other income, net, interest expense, net and
provision for income taxes are not allocated to the segments.
Restructuring and employee severance, amortization and other
acquisition-related costs, impairments and loss on disposal of
assets and litigation (recoveries)/charges, net are not allocated
to the segments. In addition, certain investment and other
spending are not allocated to the segments. Investment
spending generally includes the first-year spend for certain
projects that require incremental investments in the form of
additional operating expenses. We encourage our segments
and corporate functions to identify investment projects that will
promote innovation and provide future returns. As approval
decisions for such projects are dependent upon executive
management, the expenses for such projects are often retained
at Corporate. Investment spending within Corporate was $33
million, $37 million and $21 million for fiscal 2014, 2013 and
2012, respectively.
The following table presents segment profit by reportable
segment and Corporate:
(in millions) 2014 2013 2012
Pharmaceutical $ 1,745 $ 1,734 $ 1,558
Medical 444 372 332
Total segment profit 2,189 2,106 1,890
Corporate (304) (1,110) (98)
Total operating earnings $ 1,885 $ 996 $ 1,792
The following tables present depreciation and amortization and
additions to property and equipment by reportable segment and
at Corporate:
(in millions) 2014 2013 2012
Pharmaceutical $ 128 $ 125 $ 114
Medical 130 137 119
Corporate 201 135 92
Total depreciation and
amortization $ 459 $ 397 $ 325
(in millions) 2014 2013 2012
Pharmaceutical $ 72 $ 46 $ 44
Medical 72 48 100
Corporate 105 101 116
Total additions to property
and equipment $ 249 $ 195 $ 260
The following table presents total assets for each reportable
segment and Corporate at June 30:
(in millions) 2014 2013 2012
Pharmaceutical $ 15,361 $ 16,258 $ 16,642
Medical 6,768 6,521 4,399
Corporate 3,904 3,040 3,219
Total assets $ 26,033 $ 25,819 $ 24,260