Cardinal Health 2011 Annual Report Download - page 62

Download and view the complete annual report

Please find page 62 of the 2011 Cardinal Health annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 122

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98
  • 99
  • 100
  • 101
  • 102
  • 103
  • 104
  • 105
  • 106
  • 107
  • 108
  • 109
  • 110
  • 111
  • 112
  • 113
  • 114
  • 115
  • 116
  • 117
  • 118
  • 119
  • 120
  • 121
  • 122

I
tem 7
A
:
Q
uantitative an
dQ
ua
l
itative Disc
l
osures a
b
out Mar
k
et Ris
k
O
ur businesses are exposed to cash flow and earnin
g
s fluctuations as a result of certain market risks. These
mar
k
et r
i
s
k
spr
i
mar
il
yre
l
ate to
f
ore
i
gn exc
h
ange,
i
nterest rate, an
d
commo
di
ty pr
i
ce re
l
ate
d
c
h
anges. We
ma
i
nta
i
na
h
e
d
g
i
ng program to manage vo
l
at
ili
ty re
l
ate
d
to t
h
ese mar
k
et exposures w
hi
c
h
emp
l
oys operat
i
ona
l
,
economic, and derivative financial instruments in order to miti
g
ate risk. See Notes 1 and 12 of “Notes to
C
onso
lid
ate
d
F
i
nanc
i
a
l
Statements”
f
or
f
urt
h
er
di
scuss
i
on regar
di
ng our use o
fd
er
i
vat
i
ve
i
nstruments
.
Foreign Exchange Rate Sensitivit
y
By
nature of our
g
lobal operations, our businesses are exposed to cash flow and earnin
g
s fluctuations
resultin
g
from forei
g
n exchan
g
e rate variation. These exposures are transactional and translational in nature.
Pr
i
nc
i
pa
ld
r
i
vers o
f
t
hi
s
f
ore
i
gn exc
h
ange exposure
i
nc
l
u
d
et
h
e Cana
di
an
d
o
ll
ar, European euro, Mex
i
can peso,
a
nd Thai baht
.
Transactiona
l
Ex
p
osure
O
ur businesses’ transactional exposure arises from the purchase and sale of goods and services in currencies
o
t
h
er t
h
an our
f
unct
i
ona
l
currency or t
h
e
f
unct
i
ona
l
currency o
f
our su
b
s
idi
ar
i
es. As part o
f
our r
i
s
k
managemen
t
pro
g
ram, at the end of each fiscal
y
ear we perform a sensitivit
y
anal
y
sis on our forecasted transactional exposure
f
or the upcoming fiscal year. The fiscal 2011 and fiscal 2010 analyses utilize a currency portfolio model,
encompass
i
ng
b
ot
hi
mp
li
e
d
vo
l
at
ili
ty an
dhi
stor
i
ca
l
corre
l
at
i
on to est
i
mate t
h
e net potent
i
a
l
ga
i
nor
l
oss. T
h
ese
a
nal
y
ses included the estimated impact of our hed
g
in
g
pro
g
ram, which miti
g
ates our businesses’ transactiona
l
exposure. At each of June 30, 2011 and 2010, we had hedged approximately 4
5
percent of our businesses’
transact
i
ona
l
exposures. T
h
e
f
o
ll
ow
i
ng ta
bl
e summar
i
zes t
h
e ana
l
ys
i
sas
i
tre
l
ates to our
b
us
i
nesses’ transact
i
ona
l
exposure and the impact of a h
y
pothetical 10 percent increase or decrease
:
(
in millions
)
2
0
1
1
20
1
0
Net est
i
mate
d
transact
i
ona
l
exposur
e
.............................................
.
$
373.9
$
318.9
Sens
i
t
i
v
i
t
yg
a
i
n/
l
oss
.
.......................................................... $ 37.4 $ 31.9
Estimated offsettin
g
impact of hed
g
es
.............................................
(14.0) (17.8)
Estimated net
g
ain/loss
.
........................................................ $
2
3.4 $ 14.1
Trans
l
ationa
l
Ex
p
osur
e
We have exposure related to the translation of financial statements of our forei
g
n operations int
o
U.S.
d
o
ll
ars, our
f
unct
i
ona
l
currency. We per
f
orm a s
i
m
il
ar ana
l
ys
i
sas
d
escr
ib
e
d
a
b
ove re
l
ate
d
to t
hi
s
trans
l
at
i
ona
l
exposure. We
d
o not typ
i
ca
ll
y
h
e
d
ge any o
f
our trans
l
at
i
ona
l
exposure an
d
no
h
e
d
g
i
ng
i
mpact wa
s
included in our anal
y
sis at June 30, 2011 and 2010. The followin
g
table summarizes our businesses’ translational
exposure an
d
t
h
e
i
mpact o
f
a
h
ypot
h
et
i
ca
l
10 percent strengt
h
en
i
ng or wea
k
en
i
ng
i
nt
h
e U.S.
d
o
ll
ar
:
(
in millions)
2011
2010
Net estimated translational ex
p
osur
e
................................................
$54.0 $35.3
Sensitivity gain/loss
.
............................................................
$
5.4
$
3.
5
I
nterest Rate Sensitivit
y
We are expose
d
to c
h
an
g
es
i
n
i
nterest rates pr
i
mar
ily
as a resu
l
to
f
our
b
orrow
i
n
g
an
di
nvest
i
n
g
act
i
v
i
t
i
es to
maintain liquidit
y
and fund business operations. The nature and amount of our lon
g
-term and short-term debt can
b
e expecte
d
to
fl
uctuate as a resu
l
to
fb
us
i
ness requ
i
rements, mar
k
et con
di
t
i
ons an
d
ot
h
er
f
actors. Our po
li
cy
i
st
o
mana
g
e exposures to
i
nterest rates us
i
n
g
am
i
xo
ffi
xe
d
an
dfl
oat
i
n
g
rate
d
e
b
tas
d
eeme
d
appropr
i
ate
by
mana
g
ement. We utilize interest rate swap instruments to miti
g
ate our exposure to interest rate movements.
3
6