Cardinal Health 2011 Annual Report Download - page 63

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A
s part of our risk management program, we perform an annual sensitivity analysis on our forecasted
exposure to
i
nterest rates
f
or t
h
e
f
o
ll
ow
i
ng
fi
sca
l
year. T
hi
s ana
l
ys
i
s assumes a
h
ypot
h
et
i
ca
l
10 percent c
h
ange
i
n
interest rates. At June 30, 2011 and 2010, the
p
otential increase or decrease in annual interest ex
p
ense under this
a
nalysis as a result of this hypothetical change was
$
0.4 million and
$
0.3 million, respectively
.
Commodit
y
Price
S
ensitivit
y
We are expose
d
to mar
k
et pr
i
ce c
h
anges
f
or commo
di
t
i
es,
i
nc
l
u
di
ng o
il
-
b
ase
d
res
i
ns, cotton,
l
atex, an
d
d
iesel fuel. We t
y
picall
y
purchase raw materials at market prices and some finished
g
oods at prices based in par
t
o
n a commodity price index. As part of our risk management program, we perform sensitivity analysis on our
f
orecaste
d
commo
di
ty exposure
f
or t
h
e
f
o
ll
ow
i
ng
fi
sca
l
year. Our
f
orecaste
d
commo
di
ty exposure as o
f
June 30
,
2011 increased from the prior
y
ear primaril
y
as a result of contract ad
j
ustments with vendors, volatilit
y
of
commodity prices, changes in purchasing volumes and changes in the mix of items we buy. We have updated th
e
pr
i
or year compara
bl
e commo
di
ty exposure to
i
nc
l
u
d
ea
ll i
tems meet
i
ng t
hi
scr
i
ter
i
a
.
A
t June 30, 2011 and 2010, we had hedged a portion of these commodity exposures (see Note 12 of “Note
s
to Conso
lid
ate
d
F
i
nanc
i
a
l
Statements”
f
or
f
urt
h
er
di
scuss
i
on). T
h
eta
bl
e
b
e
l
ow summar
i
zes our ana
l
ys
i
so
f
t
h
es
e
f
orecasted commodit
y
exposures and a h
y
pothetical 10 percent fluctuation in commodit
y
prices as of June 30
,
2011 and 2010:
(
in millions
)
2
0
1
1
20
1
0
Estimated commodity exposur
e
.
................................................
.
$
472.8
$
362.3
Sens
i
t
i
v
i
ty ga
i
n/
l
oss
...........................................................
4
7.2
36
.2
Estimated offsettin
g
impact of hed
g
es
.............................................
(2
.
1) (1
.
2)
Est
i
mate
d
net
g
a
i
n/
l
oss
.
........................................................
$
4
5.1
$
35.1
We also have additional exposure to commodities throu
g
h the purchase of finished
g
oods and various othe
r
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
our norma
l
course o
fb
us
i
ness w
h
ere
o
ur contracts are not
di
rect
ly
t
i
e
d
to a commo
di
t
yi
n
d
ex. We
b
e
li
eve our tota
lg
ross ran
g
eo
f
exposure t
o
commodities, includin
g
the items listed in the table above, is $500 million to $600 million as of June 30, 2012
.
3
7