Cardinal Health 2009 Annual Report Download - page 117

business, accounting or disclosure practices of customers or suppliers. The responses to these subpoenas and
requests for information sometimes require considerable time and effort, and can result in considerable costs
being incurred by the Company. The Company expects to incur additional costs in the future in connection with
existing and future requests. Such subpoenas and requests also can lead to the assertion of claims or the
commencement of legal proceedings against the Company.
Also from time to time, the Company may determine that products manufactured, marketed or distributed
by the Company may not meet Company specifications, published standards or regulatory requirements. In such
circumstances, the Company will investigate and take appropriate corrective action, such as withdrawal of the
product from the market, correction of the product at the customer location, notice to the customer of revised
labeling, and/or other actions. The Company has recalled, and/or conducted field alerts relating to, certain of its
products from time to time. These activities can lead to costs to repair or replace affected products, temporary
interruptions in product sales and action by regulators, and can impact reported results of operations. The
Company does not believe that these activities (other than those specifically disclosed in this Form 10-K) have
had or will have a material adverse effect on its business or results of operations.
See Note 10 for additional discussion of contingencies related to the Company’s income taxes.
12. GUARANTEES
The Company had contingent commitments related to a certain operating lease agreement (see Note 19).
This operating lease consisted of certain real estate used in the operations of the Company. On June 26, 2009, the
Company repurchased all remaining buildings, equipment and land under this operating lease for $151.2 million.
Accordingly, the Company no longer carries a liability related to this agreement
In the ordinary course of business, the Company, from time to time, agrees to indemnify certain other
parties under agreements with the Company, including under acquisition and disposition agreements, customer
agreements and intellectual property licensing agreements. Such indemnification obligations vary in scope and,
when defined, in duration. In many cases, a maximum obligation is not explicitly stated and therefore the overall
maximum amount of the liability under such indemnification obligations cannot be reasonably estimated. Where
appropriate, such indemnification obligations are recorded as a liability. Historically, the Company has not,
individually or in the aggregate, made payments under these indemnification obligations in any material
amounts. In certain circumstances, the Company believes that its existing insurance arrangements, subject to the
general deduction and exclusion provisions, would cover portions of the liability that may arise from these
indemnification obligations. In addition, the Company believes that the likelihood of a material liability being
triggered under these indemnification obligations is not significant.
In the ordinary course of business, the Company, from time to time, enters into agreements that obligate the
Company to make fixed payments upon the occurrence of certain events. Such obligations primarily relate to
obligations arising under acquisition transactions, where the Company has agreed to make payments based upon
the achievement of certain financial performance measures by the acquired business. Generally, the obligation is
capped at an explicit amount. The Company’s aggregate exposure for these obligations, assuming the
achievement of all financial performance measures, is not material. Any potential payment for these obligations
would be treated as an adjustment to the purchase price of the related entity and would have no impact on the
Company’s results of operations.
In the ordinary course of business, the Company, from time to time, extends loans to its customers which
are subsequently sold to a bank. The bank services and administers these loans as well as any new loans the
Company may direct. In order for the bank to purchase such loans, it requires the absolute and unconditional
obligation of the Company to repurchase such loans upon the occurrence of certain events described in the
agreement including, but not limited to, borrower payment default that exceeds 90 days, insolvency and
bankruptcy. At June 30, 2009 and 2008, notes in the program subject to the guaranty of the Company totaled
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