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Notes to Financial Statements
65 Cardinal Health | Fiscal 2015 Form 10-K
in other assets and deferred income taxes and other liabilities in the
consolidated balance sheet.
Also, during fiscal 2015, we terminated notional amounts of $875
million of pay-floating interest rate swaps in connection with the debt
redemption in December 2014 described in Note 7. These swaps
were previously designated as fair value hedges.
The following tables summarize the outstanding interest rate swaps
designated as fair value hedges at June 30:
2015
(in millions) Notional Amount Maturity Date
Pay-floating interest rate
swaps $ 1,613 Jun 2017 -Jun 2022
2014
(in millions) Notional Amount Maturity Date
Pay-floating interest rate
swaps $ 1,438 Jun 2015 - Jun 2022
The following table summarizes the gain/(loss) recognized in
earnings for interest rate swaps designated as fair value hedges:
(in millions) 2015 2014 2013
Pay-floating interest rate swaps (1) (2) $ 14 $ 23 $ 28
Fixed-rate debt (1) (14) (23) (28)
(1) Included in interest expense, net in the consolidated statements of earnings.
(2) Excludes $22 million fair value adjustment to the previously terminated interest
rate swaps as a result of the December 2014 debt extinguishment as disclosed
in Note 7.
There was no ineffectiveness associated with these derivative
instruments for all periods presented.
Cash Flow Hedges
We enter into derivative instruments to hedge our exposure to
changes in cash flows attributable to interest rate, foreign currency
and commodity price fluctuations associated with certain forecasted
transactions. These derivative instruments are designated and
qualify as cash flow hedges. Accordingly, the effective portion of the
gain or loss on the derivative instrument is reported as a component
of other comprehensive income and reclassified into earnings in the
same line item associated with the forecasted transaction and in the
same period during which the hedged transaction affects earnings.
The ineffective portion of the gain or loss on the derivative instrument
is recognized in earnings immediately.
During fiscal 2015 and 2014 we entered into forward interest rate
swaps with a total notional amount of $850 million and $50 million,
respectively, to hedge probable, but not firmly committed, future
transactions associated with our debt.
Additionally, during fiscal 2015 we terminated $1,150 million in
forward interest rate swaps that were previously designated as cash-
flow hedges.
We enter into foreign currency contracts to protect the value of
anticipated foreign currency revenues and expenses. At June 30,
2015 and 2014, we held contracts to hedge probable, but not firmly
committed, revenue and expenses. The principal currencies hedged
are the Canadian dollar, Mexican peso, European euro and Thai baht.
We enter into commodity contracts to manage the price risk
associated with forecasted purchases of certain commodities used
in our Medical segment.
The following tables summarize the outstanding cash flow hedges
at June 30:
2015
(in millions) Notional Amount Maturity Date
Foreign currency contracts $ 146 Jul 2015 -Jun 2016
Commodity contracts 22 Jul 2015 -Mar 2018
2014
(in millions) Notional Amount Maturity Date
Forward interest rate swaps $ 300 Jun 2025 - Oct 2026
Foreign currency contracts 182 Jul 2014 - Jun 2015
Commodity contracts 24 Jul 2014 - Mar 2017
The following table summarizes the gain/(loss) included in AOCI for
derivative instruments designated as cash flow hedges at June 30:
(in millions) 2015 2014
Forward interest rate swaps $ — $ 9
Commodity contracts (3) 1
Foreign currency contracts 2(1)
The following table summarizes the gain/(loss) reclassified from
AOCI into earnings for derivative instruments designated as cash
flow hedges:
(in millions) 2015 2014 2013
Foreign currency contracts (1) $ 1 $ — $ 1
Foreign currency contracts (2) 42 1
Foreign currency contracts (3) (2) 1 1
Commodity contracts (3) (1) — 1
Forward interest rate swaps (4) —— 1
(1) Included in revenue in the consolidated statements of earnings.
(2) Included in cost of products sold in the consolidated statements of earnings.
(3) Included in SG&A expenses in the consolidated statements of earnings.
(4) Included in interest expense, net in the consolidated statements of earnings.
The amount of ineffectiveness associated with these derivative
instruments was immaterial for all periods presented.
Economic (Non-Designated) Hedges
We enter into foreign currency contracts to manage our foreign
exchange exposure related to intercompany financing transactions
and other balance sheet items subject to revaluation that do not meet
the requirements for hedge accounting treatment. Accordingly, these
derivative instruments are adjusted to current market value at the
end of each period through earnings. The gain or loss recorded on
these instruments is substantially offset by the remeasurement
adjustment on the foreign currency denominated asset or liability.
The settlement of the derivative instrument and the remeasurement
adjustment on the foreign currency denominated asset or liability are