10-K/APeriod: FY2007

CARDINAL HEALTH INC Annual Report (Amendment), Year Ended Jun 30, 2007

Filed May 8, 2008For Securities:CAH

Summary

Cardinal Health Inc. (CAH) reported strong revenue growth in fiscal year 2007, reaching $86.9 billion, a 9% increase from the prior year. This growth was primarily driven by its Pharmaceutical Supply Chain Services segment, which accounted for approximately 86% of total segment revenue, and supported by increased volume from both bulk and non-bulk customers, as well as pharmaceutical price appreciation. However, the company experienced a significant decrease in operating earnings, down 26% to $1.4 billion, largely due to substantial "special items" totaling $772 million. These special items were predominantly driven by litigation settlement reserves ($655 million) and in-process research and development expenses related to acquisitions. Despite the decline in operating earnings, net earnings saw a substantial increase of 93% to $1.9 billion, primarily due to a $1.1 billion after-tax gain from the divestiture of its PTS Business. The company also actively returned capital to shareholders through $3.8 billion in share repurchases and increased dividend payments.

Key Highlights

  • 1Revenue grew 9% to $86.9 billion in fiscal year 2007, driven by the Pharmaceutical Supply Chain Services segment.
  • 2Operating earnings declined 26% to $1.4 billion due to $772 million in "special items," primarily litigation settlement reserves.
  • 3Net earnings increased 93% to $1.9 billion, largely attributed to a $1.1 billion after-tax gain from the sale of the PTS Business.
  • 4The company repurchased approximately $3.8 billion of its common stock during fiscal year 2007.
  • 5Strategic acquisitions were made, including Viasys for approximately $1.5 billion, to enhance product offerings.
  • 6The company reorganized its reportable segments into five categories to better align operations with customer needs.
  • 7Despite increased customer discounts impacting gross margins, the company expects to mitigate these pressures through sales growth, cost controls, and synergies from acquisitions.

Frequently Asked Questions

Cardinal Health's revenue grew by 9% to $86.9 billion in fiscal year 2007. The primary driver was the Healthcare Supply Chain Services — Pharmaceutical segment, which represents about 86% of total segment revenue. This growth was fueled by increased volume from both bulk and non-bulk customers and by pharmaceutical price appreciation.

Operating earnings decreased by 26% to $1.4 billion due to significant "special items" totaling $772 million. The major components of these special items were reserves for litigation settlements ($655 million) and in-process research and development expenses, largely related to the Viasys acquisition ($85 million).

The divestiture of the PTS Business resulted in an after-tax book gain of approximately $1.1 billion. This gain significantly boosted net earnings, which increased by 93% to $1.9 billion in fiscal year 2007. The net proceeds of approximately $3.1 billion were used to repurchase the company's common shares.

Cardinal Health was active in returning capital to shareholders in fiscal year 2007. The company repurchased approximately $3.8 billion of its common shares and also increased its quarterly dividend payments. These activities supported the company's long-term goal of returning 50% of net cash from operating activities to shareholders.