Cardinal Health 2010 Annual Report Download - page 90

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r
esolutions can occur, assessing contingencies is highly subjective and requires judgments about future events
.
W
e regularly review contingencies to determine whether our accruals are adequate. The amount of ultimate loss
may differ from these estimates
.
We recognize income from the favorable outcome of litigation when we receive the associated cash o
r
asse
t
s
.
We recognize estimated loss contingencies for litigation and regulatory matters and income from favorable
r
esolution of litigation in litigation (credits)/charges, net in our consolidated statements of earnings.
Insurance Procee
ds
I
n fiscal 2010, we recognized
$
27.2 million of income related to insurance proceeds released from escro
w
f
ollowing the resolution of securities and derivative litigation against certain of our directors and officers. This
amount is comprised of
$
25.7 million received from directors and officers’ insurance policies recognized in
litigation (credits)/charges, net and
$
1.5 million of accrued interest income recognized in interest expense, net. I
n
f
iscal 2008, we recognized
$
58.0 million of income related to settlement of several derivative actions against
directors and officers. This amount is com
p
rised of
$
70.0 million received from the directors and officers
’
insurance policies less
$
12.0 million paid for the plaintiffs’ attorneys’ fees and costs. These amounts are
r
ecognized in litigation (credits)/charges, net. For more information about this matter, see our Annual Reports o
n
Form 10-K for fiscal 2008 and 2007.
Antitrust Litigation Proceeds
I
n fiscal 2010, we recognized
$
40.8 million of income resulting from settlement of a class action antitrus
t
claim alleging that a defendant branded pharmaceutical manufacturer took improper actions to delay the entry o
f
a generic version of a branded pharmaceutical. This amount is recognized in litigation (credits)/charges, net.
Income Taxe
s
S
ee Note 9 for discussion of contingencies related to our income taxes.
1
1.
GU
ARANTEE
S
I
n the ordinary course of business, we agree to indemnify certain other parties under acquisition an
d
disposition agreements, customer agreements, intellectual property licensing agreements and other agreements
.
Such indemnification obligations vary in scope and, when defined, in duration. In many cases, a maximum
o
bligation 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, we have not, individually or in the aggregate, made payments under thes
e
indemnification obligations in any material amounts. In certain circumstances, we believe that 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, we believe that the likelihood of a material
liability being triggered under these indemnification obligations is not significant.
We enter into agreements that obligate us to make fixed payments upon the occurrence of certain events.
Such obligations primarily relate to obligations arising under acquisition transactions, where we have agreed to
make payments based upon the achievement of certain financial performance measures by the acquired business.
G
enerally, the obligation is capped at an explicit amount. As of June 30, 2010, our aggregate exposure for these
o
bligations, assuming the achievement of all financial performance measures, was not material. However, in
connection with our purchase of Healthcare Solutions Holding, LLC in July 2010, we are obligated to pay up to
$
150.0 million in contingent consideration
.
64