Cardinal Health 2012 Annual Report Download - page 38

Cardinal Health, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
36
subordinated to the liabilities of our subsidiaries, including trade payables
of $11.7 billion.
In May 2012, we sold $250 million aggregate principal amount of fixed
rate notes due 2017 with interest at 1.900% per year in a registered
offering. The 1.900% Notes mature on June 15, 2017. In May 2012, we
also sold $250 million aggregate principal amount of fixed rate notes due
2022 with interest at 3.200% per year in a registered offering. The 3.200%
Notes mature on June 15, 2022. These notes are unsecured and
unsubordinated obligations and rank equally in right of payment with all
of our existing and future unsecured and unsubordinated indebtedness.
In December 2010, we sold $500 million aggregate principal amount of
fixed rate notes due 2020 with interest at 4.625% per year (“4.625%
Notes”) in a registered offering. The 4.625% Notes mature on December
15, 2020. These notes are unsecured and unsubordinated obligations and
rank equally in right of payment with all of our existing and future unsecured
and unsubordinated indebtedness.
The 5.50% Notes due 2013, 6.00% Notes due 2017, 1.900% Notes due
2017, 4.625% Notes due 2020, and 3.200% Notes due 2022 require us
to offer to purchase the notes at 101% of the principal amount plus accrued
and unpaid interest, if we have a defined change of control and specified
ratings below investment grade by S&P, Moody’s, and Fitch.
On September 24, 2009, we completed a debt tender announced on
August 27, 2009 for an aggregate purchase price, including an early tender
premium but excluding accrued interest, fees and expenses, of $1.1 billion.
In connection with this transaction, we incurred a pre-tax loss for the early
extinguishment of debt of $40 million. The debt tender was completed
using a portion of the $1.4 billion of cash distributed to us from CareFusion
in connection with the Spin-Off.
Other Financing Arrangements
In addition to cash and equivalents, at June 30, 2012 and 2011, our sources
of liquidity included a $1.5 billion commercial paper program backed by a
$1.5 billion revolving credit facility that expires in May 2016. The revolving
credit facility exists largely to support issuances of commercial paper as
well as other short-term borrowings for general corporate purposes.
We also maintain a $950 million committed receivables sales facility
program that expires in November 2012. The committed receivables sales
facility program exists largely to provide liquidity by selling interests in our
receivables.
We had no outstanding borrowings from the commercial paper program
and no outstanding balance under the committed receivables sales facility
program at June 30, 2012 and 2011. We also had no outstanding balance
under the revolving credit facility at June 30, 2012 and 2011, except for
$44 million of standby letters of credit in each fiscal year. Our revolving
credit and committed receivables sales facility programs require us to
maintain a consolidated interest coverage ratio, as of any fiscal quarter
end, of at least 4-to-1 and a consolidated leverage ratio of no more than
3.25-to-1. As of June 30, 2012, we were in compliance with these financial
covenants.
We also maintain other short-term credit facilities and an unsecured line
of credit that allowed for borrowings up to $218 million and $174 million
at June 30, 2012 and 2011, respectively. The $183 million and $110 million
balance of other obligations at June 30, 2012 and 2011, respectively,
consisted primarily of additional notes, loans and capital leases.
8. Income Taxes
Earnings before income taxes and discontinued operations are as follows
for fiscal 2012, 2011 and 2010:
(in millions) 2012 2011 2010
U.S. Operations $ 1,514 $ 1,299 $ 980
Non-U.S. Operations 184 219 232
Earnings before income taxes and
discontinued operations $ 1,698 $ 1,518 $ 1,212
The provision for income taxes from continuing operations consists of the
following for fiscal 2012, 2011 and 2010:
(in millions) 2012 2011 2010
Current:
Federal $ 430 $ 387 $ 430
State and local 27 20 63
Non-U.S. 13 17 12
Total current $ 470 $ 424 $ 505
Deferred:
Federal 124 92 103
State and local 28 29 18
Non-U.S. 67(1)
Total deferred $ 158 $ 128 $ 120
Provision for income taxes $ 628 $ 552 $ 625
A reconciliation of the provision based on the federal statutory income tax
rate to our effective income tax rate from continuing operations is as follows
for fiscal 2012, 2011 and 2010:
2012 2011 2010
Provision at Federal statutory rate 35.0% 35.0% 35.0%
State and local income taxes, net of federal benefit 2.3 2.6 4.2
Foreign tax rate differential (2.3) (2.5) (3.3)
Nondeductible/nontaxable items —0.6 0.2
Change in measurement of an uncertain tax position and
an IRS settlement 0.9 2.4 1.3
Valuation allowances 0.1 (0.6) (2.3)
Unremitted foreign earnings (0.2) (0.1) 13.9
Other 1.2 (1.0) 2.6
Effective income tax rate 37.0% 36.4% 51.6%
As of June 30, 2012, we had $2.2 billion of total undistributed earnings
from non-U.S. subsidiaries, of which $1.5 billion are intended to be
permanently reinvested in non-U.S. operations. We recorded a charge of
$168 million during fiscal 2010 to reflect the anticipated repatriation of
certain foreign earnings. With respect to the earnings that are considered
permanently reinvested, no U.S. tax provision has been accrued related
to the repatriation of these earnings. It is not practicable to estimate the
amount of U.S. tax that might be payable on the eventual remittance of
such earnings.
Deferred income taxes arise from temporary differences between financial
reporting and tax reporting bases of assets and liabilities and operating
loss and tax credit carryforwards for tax purposes.