Cardinal Health 2009 Annual Report Download - page 104

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5. SALES-TYPE LEASES
The Company’s sales-type leases are for terms generally ranging up to five years. Lease receivables are
generally collateralized by the underlying equipment. The components of the Company’s net investment in sales-
type leases are as follows as of June 30, 2009 and 2008:
June 30
(in millions) 2009 2008
Future minimum lease payments receivable ...................................... $1,502.4 $1,486.0
Unguaranteed residual values ................................................. 24.9 24.4
Unearned income ........................................................... (192.0) (203.3)
Allowance for uncollectible minimum lease payments receivable ..................... (6.6) (6.6)
Net investment in sales-type leases ............................................. 1,328.7 1,300.5
Less: current portion .................................................... 398.9 383.7
Net investment in sales-type leases, less current portion ............................ $ 929.8 $ 916.8
Future minimum lease payments to be received pursuant to sales-type leases during the next five fiscal years
and thereafter are as follows:
(in millions) 2010 2011 2012 2013 2014 Thereafter Total
Minimum lease payments .............. $460.1 $415.8 $339.7 $212.7 $72.0 $2.1 $1,502.4
6. INVENTORIES
A substantial portion of inventories (approximately 71% and 70% at June 30, 2009 and 2008,
respectively) are valued at the lower of cost, using the LIFO method, or market. These inventories are included
within the core distribution facilities of the Company’s Healthcare Supply Chain Services segment (“Distribution
facilities”) and are primarily merchandise inventories. The Company believes that the average cost method of
inventory valuation provides a reasonable approximation of the current cost of replacing inventory within the
Distribution facilities. As such, the LIFO reserve is the difference between (a) inventory at the lower of LIFO
cost or market and (b) inventory at replacement cost determined using the average cost method of inventory
valuation. In fiscal 2009 and 2008, the Company did not record any LIFO reserve reductions.
If the Company had used the average cost method of inventory valuation for all inventory within the core
Distribution facilities, inventories would not have changed in fiscal 2009 or fiscal 2008. In fact, primarily due to
continued deflation in generic pharmaceutical inventories, inventories at LIFO were $34.9 million and
$42.5 million higher than the average cost value as of June 30, 2009 and 2008, respectively. The Company’s
policy, however, is not to record inventories in excess of current market value.
The remaining inventory is primarily stated at the lower of cost, using the FIFO method, or market.
Inventories presented on the Company’s consolidated balance sheets are net of reserves for excess and
obsolete inventory which were $87.9 million and $93.1 million at June 30, 2009 and 2008, respectively. The
Company reserves for inventory obsolescence using estimates based on historical experiences, sales trends,
specific categories of inventory and age of on-hand inventory.
7. DISCONTINUED OPERATIONS AND ASSETS HELD FOR SALE
PTS Business
During the second quarter of fiscal 2007, the Company committed to plans to sell the PTS Business, and
met the held for sale criteria set forth in SFAS No. 144, “Accounting for the Impairment or Disposal of Long-
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