Cardinal Health 2011 Annual Report Download - page 72

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T
he following table summarizes the revenue that was derived from GPO members through the contractual
a
rrangements esta
bli
s
h
e
d
w
i
t
h
Novat
i
on, LLC an
d
Prem
i
er Purc
h
as
i
ng Partners, L.P., our two
l
argest GP
O
relationshi
p
s in terms of revenue:
P
e
r
ce
nt
o
fR
eve
n
ue
2
011
2
01
0
2
00
9
G
P
O
mem
b
ers ............................................................... 14% 1
5
%1
5
%
O
ur trade receivable balances are with individual members of the GPO, and therefore no si
g
nifican
t
concentration of credit risk exists with these t
y
pes of arran
g
ements.
In
v
entor
i
es
.
A substantial
p
ortion of our inventories (70
p
ercent at June 30, 2011 and 73
p
ercent June 30
,
2010)
i
sva
l
ue
d
at t
h
e
l
ower o
f
cost, us
i
ng t
h
e LIFO met
h
o
d
, or mar
k
et. T
h
ese
i
nventor
i
es are
i
nc
l
u
d
e
d
w
i
t
hi
nt
h
e
core pharmaceutical distribution facilities of our Pharmaceutical se
g
ment (“distribution facilities”) and are
primarily merchandise inventories. We believe that the average cost method of inventory valuation provides a
reasona
bl
e approx
i
mat
i
on o
f
t
h
e current cost o
f
rep
l
ac
i
ng
i
nventory w
i
t
hi
nt
h
e
di
str
ib
ut
i
on
f
ac
ili
t
i
es. As suc
h
,t
he
LIFO reserve is the difference between (a) inventor
y
at the lower of LIFO cost or market and (b) inventor
y
a
t
replacement cost determined using the average cost method of inventory valuation. In fiscal 2011 and 2010, w
e
did
not recor
d
any LIFO reserve re
d
uct
i
ons
.
If
we
h
a
d
use
d
t
h
e average cost met
h
o
d
o
fi
nventory va
l
uat
i
on
f
or a
ll i
nventory w
i
t
hi
nt
h
e
di
str
ib
ut
i
on
f
acilities, inventories would not have chan
g
ed in fiscal 2011 or fiscal 2010. Inventories valued at LIFO were
$
7.6 million and
$
37.7 million higher than the average cost value as of June 30, 2011 and 2010, respectively. W
e
d
o not recor
di
nventor
i
es
i
n excess o
f
rep
l
acement cost
.
O
ur rema
i
n
i
n
gi
nventor
yi
spr
i
mar
ily
state
d
at t
h
e
l
ower o
f
cost, us
i
n
g
t
h
e FIFO met
h
o
d
, or mar
k
et
.
I
nventories presented on the consolidated balance sheet are net of reserves for excess and obsolete inventor
y
which were
$
40.0 million and
$
34.4 million at June 30, 2011 and 2010, respectively. We reserve for inventor
y
ob
so
l
escence us
i
ng est
i
mates
b
ase
d
on
hi
stor
i
ca
l
exper
i
ence, sa
l
es tren
d
s, spec
ifi
c categor
i
es o
fi
nventory, an
d
ag
e of on-hand inventor
y
.
C
ash Discounts.
M
anufacturer cash discounts are recorded as a component of inventor
y
cost and reco
g
nized
a
sare
d
uct
i
on o
f
cost o
f
pro
d
ucts so
ld
w
h
en t
h
ere
l
ate
di
nventory
i
sso
ld
.
P
roperty an
d
Equipment
.
P
roperty an
d
equ
i
pment are carr
i
e
d
at cost
l
ess accumu
l
ate
dd
eprec
i
at
i
on. Property
a
nd equipment held for sale are recorded at the lower of cost or fair value less cost to sell. Depreciation expens
e
is computed usin
g
the strai
g
ht-line method over the estimated useful lives of the assets, includin
g
capital leas
e
a
ssets w
hi
c
h
are
d
eprec
i
ate
d
over t
h
e terms o
f
t
h
e
i
r respect
i
ve
l
eases. We use t
h
e
f
o
ll
ow
i
ng range o
f
use
f
u
lli
ves
f
or our propert
y
and equipment cate
g
ories: buildin
g
s and improvements—1 to 50
y
ears; machiner
y
an
d
equipment—2 to 20
y
ears; furniture and fixtures—3 to 10
y
ears.
T
he following table shows depreciation expense for fiscal 2011, 2010 and 2009:
Fisca
lY
ea
rEn
ded
June 30,
(
in millions)
2011
2010
2009
De
p
reciation ex
p
ens
e
...................................................
$243.7 $233.4 $206.9
When certain events or chan
g
es in operatin
g
conditions occur, an impairment assessment ma
y
be performe
d
o
nt
h
e recovera
bili
ty o
f
t
h
e carry
i
ng amounts. Repa
i
rs an
d
ma
i
ntenance expen
di
tures are expense
d
as
i
ncurre
d.
I
nterest on
l
on
g
-term pro
j
ects
i
s cap
i
ta
li
ze
d
us
i
n
g
a rate t
h
at approx
i
mates t
h
ewe
igh
te
d
avera
g
e
i
nterest rate o
n
l
on
g
-term obli
g
ations, which was 4.21% at June 30, 2011. The amount of capitalized interest was immaterial fo
r
all fi
sca
l
years presente
d.
46