Cardinal Health 2010 Annual Report Download - page 63

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translational exposure. We do not typically hedge any of our translational exposure and no hedging impact wa
s
included in our analysis at June 30, 2010 and 2009. The following table summarizes our businesses’ translationa
l
exposure and the impact of a hypothetical 10% strengthening or weakening in the U.S. dollar (in millions):
2
0
1
0
2009
Net estimated translational ex
p
osur
e
................................................
$
35.3
$
63.3
Sensitivity gain/los
s
.............................................................
$
3.5
$
6.3
I
nterest Rate Sensitivit
y
We are exposed to changes in interest rates primarily as a result of our borrowing and investing activities t
o
maintain liquidity and fund business operations. The nature and amount of our long-term and short-term debt ca
n
be expected to fluctuate as a result of business requirements, market conditions and other factors. Our policy is t
o
manage exposures to interest rates using a mix of fixed and floating rate debt as deemed appropriate by
management. We utilize interest rate swap instruments to mitigate our exposure to interest rate movements.
A
s part of our risk management program, we annually perform a sensitivity analysis on our forecaste
d
exposure to interest rates for the following fiscal year. This analysis assumes a hypothetical 10% change i
n
interest rates. At June 30, 2010 and 2009, the
p
otential increase or decrease in interest ex
p
ense under thi
s
analysis as a result of this hypothetical change was
$
0.3 million and
$
0.1 million, respectively
.
Commodit
y
Price Sensitivit
y
We purchase certain commodities for use in our manufacturing and distribution processes, which include
latex, nitrile, diesel fuel and polypropylene, among others. We typically purchase these commodities at market
p
rices, and as a result, are affected by price fluctuations. As part of our risk management program, we perfor
m
sensitivity analysis on our forecasted commodity exposure for the following fiscal year. At June 30, 2010 and
2009, we had hedged a portion of these commodity exposures (see Note 12 of “Notes to Consolidated Financia
l
Statements” for further discussion). The table below summarizes our analysis of these forecasted commodity
exposures and a hypothetical 10% fluctuation in commodity prices as of June 30, 2010 and 2009 (in millions)
:
2
0
1
0
2
009
Estimated commodity exposur
e
..................................................
$
240.4
$
117.8
Sensitivity gain/los
s
...........................................................
$
2
4.0
$
11.8
Estimated offsetting impact of hedges
.............................................
(1
.
2) (1
.
0)
Est
i
mate
d
net ga
i
n/
l
oss
.
........................................................
$
2
2.8
$
10.8
We a
l
so
h
ave exposure to certa
i
n energy re
l
ate
d
commo
di
t
i
es,
i
nc
l
u
di
ng natura
l
gas an
d
e
l
ectr
i
c
i
ty t
h
roug
h
o
ur norma
l
course o
fb
us
i
ness. T
h
ese exposures resu
l
tpr
i
mar
il
y
f
rom operat
i
ng our
di
str
ib
ut
i
on, manu
f
actur
i
ng
,
an
d
corporate
f
ac
ili
t
i
es. In certa
i
n
d
eregu
l
ate
d
mar
k
ets, we
f
rom t
i
me to t
i
me enter
i
nto
l
ong-term purc
h
as
e
contracts to supp
l
yt
h
ese
i
tems at a spec
ifi
cpr
i
ce.
3
7