Cardinal Health 2011 Annual Report Download - page 71

Download and view the complete annual report

Please find page 71 of the 2011 Cardinal Health annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 122

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98
  • 99
  • 100
  • 101
  • 102
  • 103
  • 104
  • 105
  • 106
  • 107
  • 108
  • 109
  • 110
  • 111
  • 112
  • 113
  • 114
  • 115
  • 116
  • 117
  • 118
  • 119
  • 120
  • 121
  • 122

reported in the consolidated financial statements and accompanying notes. Estimates, judgments and assumption
s
a
re use
di
nt
h
e account
i
ng an
ddi
sc
l
osure re
l
ate
d
to, among ot
h
er
i
tems, a
ll
owance
f
or
d
ou
b
t
f
u
l
accounts,
inventor
y
valuation, business combinations,
g
oodwill and intan
g
ible asset impairment, vendor reserves, share-
based compensation, and income taxes. Actual amounts could ultimately differ from these estimated amounts
.
Cash E
q
uivalents
.
W
e consider all liquid investments purchased with a maturit
y
of three months or less t
o
be cash equivalents. The carrying value of cash equivalents approximates fair value.
Recei
v
ables. Trade receivables are primaril
y
comprised of amounts owed to us throu
g
h our distributio
n
businesses and are
p
resented net of an allowance for doubtful accounts of
$
134.5 million and
$
123.5 million at
J
une 30, 2011 an
d
2010, respect
i
ve
l
y. An account
i
s cons
id
ere
d
past
d
ue on t
h
e
fi
rst
d
ay a
f
ter
i
ts
d
ue
d
ate. In
a
ccordance with contract terms, we
g
enerall
y
have the abilit
y
to char
g
e customers service fees or hi
g
her prices if
a
n account is considered past due. We continuously monitor past due accounts and establish appropriate reserve
s
to cover potent
i
a
ll
osses, w
hi
c
h
are
b
ase
d
pr
i
mar
il
yon
hi
stor
i
ca
l
co
ll
ect
i
on rates an
d
t
h
e cre
di
t wort
hi
ness o
f
t
he
customer. We write-off an
y
amounts deemed uncollectible a
g
ainst the established allowance for doubtful
a
ccounts.
We provide financin
g
to various customers. Such financin
g
arran
g
ements ran
g
e from 90 da
y
sto10
y
ears, a
t
interest rates that are generally subject to fluctuation. Interest income on these arrangements is recognized as it i
s
earne
d
.T
h
e
fi
nanc
i
ngs may
b
eco
ll
atera
li
ze
d
, guarantee
db
yt
hi
r
d
part
i
es or unsecure
d
.F
i
nance notes an
d
a
ccrued interest receivables were $90.4 million (current
p
ortion $18.9 million) and $109.9 million (current
portion
$
20.9 million) at June 30, 2011 and 2010, respectively, and are included in other assets (current portion is
i
nc
l
u
d
e
di
n prepa
id
expenses an
d
ot
h
er). F
i
nance notes rece
i
va
bl
e are reporte
d
net o
f
an a
ll
owance
f
or
d
ou
b
t
f
u
l
a
ccounts of $14.9 million and $16.2 million at June 30, 2011 and 2010, respectivel
y
. We estimate an allowance
f
or these financing receivables based on historical collection rates and the credit worthiness of the customer.
Concentrations of Credit Risk and Major Customers
.
We maintain cash depositor
y
accounts with ma
j
o
r
banks throughout the world and invest in high quality short-term liquid instruments. Such investments are made
o
n
l
y
i
n
i
nstruments
i
ssue
d
or en
h
ance
db
y
hi
g
h
qua
li
ty
i
nst
i
tut
i
ons. T
h
ese
i
nvestments mature w
i
t
hi
nt
h
ree
months and we have not incurred an
y
related losses
.
O
ur tra
d
e rece
i
va
bl
es,
l
ease rece
i
va
bl
es,
fi
nance notes, an
d
accrue
di
nterest rece
i
va
bl
es are expose
d
to
a
concentration of credit risk with customers in the retail and healthcare sectors. Credit risk can be affected b
y
changes in reimbursement and other economic pressures impacting the hospital and acute care sectors of th
e
h
ea
l
t
h
care
i
n
d
ustry. Suc
h
cre
di
tr
i
s
ki
s
li
m
i
te
dd
ue to support
i
ng co
ll
atera
l
an
d
t
h
e
di
vers
i
ty o
f
t
h
e customer
b
ase
,
includin
g
its wide
g
eo
g
raphic dispersion. We perform on
g
oin
g
credit evaluations of our customers’ financial
conditions and maintain reserves for credit losses. Such losses historically have been within our expectations
.
T
he followin
g
table summarizes all of our customers that individuall
y
account for at least 10 percent o
f
revenue and their corresponding percent of gross trade receivables. The customers in the table below are service
d
t
h
roug
h
our P
h
armaceut
i
ca
l
segment.
P
e
r
ce
nt
o
fR
eve
n
ue
P
ercent o
fG
ros
s
Tr
ade
R
eceivab
l
es at
June 30,
201
1
2010 2009
2
011 2010
Wa
lg
reen Co
.
................................................
23% 24% 24% 31% 32%
C
VS Caremark Cor
p
oratio
n
.
................................... 22% 22% 21% 20% 21
%
We
h
ave entere
di
nto a
g
reements w
i
t
hg
roup purc
h
as
i
n
g
or
g
an
i
zat
i
ons (“GPOs”) w
hi
c
h
act as purc
h
as
i
n
g
ag
ents that ne
g
otiate vendor contracts on behalf of their members.
45