Cardinal Health 2009 Annual Report Download - page 119
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The following table summarizes the fair value of the Company’s assets and liabilities related to derivative
financial instruments, and the respective line items in which they were recorded in the consolidated balance
sheets as of June 30, 2009 and 2008:
(in millions) Balance Sheet Location
June 30,
2009
June 30,
2008
Assets:
Derivatives designated as hedging instruments:
Pay-floating interest rate swaps ........ Prepaid expenses and other $ — $39.2
Foreign currency forward contracts ..... Prepaid expenses and other 1.2 3.6
Commodity contracts ................ Prepaid expenses and other 1.2 —
Total ................................. 2.4 42.8
Derivatives not designated as hedging
instruments:
Foreign currency forward contracts ..... Other long-term assets 64.5 47.7
Total Assets ........................... $66.9 $90.5
Liabilities:
Derivatives designated as hedging instruments:
Pay-fixed interest rate swaps .......... Other accrued liabilities $ 3.7 $ 7.5
Pay-floating interest rate swaps ........ Other accrued liabilities — 24.5
Foreign currency forward contracts ..... Deferred income taxes and other liabilities 7.1 8.8
Total ................................. 10.8 40.8
Derivatives not designated as hedging
instruments:
Foreign currency forward contracts ..... Other accrued liabilities — 0.3
Total Liabilities ......................... $10.8 $41.1
Fair Value Hedges
The Company enters into pay-floating interest rate swaps to hedge the changes in the fair value of fixed rate
debt resulting from fluctuations in interest rates. These contracts are designated and qualify as fair value hedges.
Accordingly, the gain or loss recorded on the pay-floating interest rate swaps is directly offset by the change in
fair value of the underlying debt. Both the derivative instrument and the underlying debt are adjusted to market
value at the end of each period with any resulting gain or loss recorded in interest expense and other in the
consolidated statements of earnings.
On March 20, 2009, the Company terminated all of its pay-floating interest rate swaps and received net
settlement proceeds totaling $123.1 million. These proceeds are classified as cash provided by operating
activities in the consolidated statements of cash flows. There was no immediate impact to the statement of
earnings; however, the fair value adjustment to debt will be amortized over the life of the underlying debt as a
reduction to interest expense in conjunction with the occurrence of the originally forecasted transactions.
The following table summarizes the interest rate swaps designated as fair value hedges outstanding as of
June 30, 2009 and 2008 (in millions):
June 30, 2009 June 30, 2008
Type Notional Amount
Maturity Date
Gain/(Loss)
Notional
Amount
Maturity Date
Gain/(Loss)
Pay-floating interest rate swaps ........... $— — $1,250.0 June 2012 –June 2017
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