Cardinal Health 2013 Annual Report Download - page 48

Cardinal Health, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
46
the foreign currency denominated asset or liability. The settlement of the
derivative instrument and the remeasurement adjustment on the foreign
currency denominated asset or liability are both recorded in other
(income)/expense, net at the end of each period.
The following tables summarize the outstanding economic (non-
designated) derivative instruments at June 30:
2013
(in millions) Notional Amount Maturity Date
Foreign currency contracts $ 479 Jul 2013 -Sep 2013
2012
(in millions) Notional Amount Maturity Date
Foreign currency contracts $ 500 Jul 2012 - Sep 2012
During fiscal 2011, we entered into swap contracts of certain commodities
to mitigate price volatility for materials we purchased or used in our
manufacturing and distribution businesses. These instruments did not
qualify for hedge accounting and as such fair value changes as well as
periodic settlements of these contracts were recorded in other income,
net in the consolidated statements of earnings. These instruments
matured in the same fiscal year.
The following table summarizes the gain/(loss) recognized in earnings for
economic (non-designated) derivative instruments:
(in millions) 2013 2012 2011
Foreign currency contracts (1) $ 6 $ (39) $ 36
Commodity contracts (1) —(1) (1)
(1) Included in other income, net in the consolidated statements of earnings.
Fair Value of Financial Instruments
The carrying amounts of cash and equivalents, trade receivables, net,
accounts payable and other accrued liabilities at June 30, 2013 and 2012
approximate fair value due to their short-term maturities.
Cash balances are invested in accordance with our investment policy.
These investments are exposed to market risk from interest rate
fluctuations and credit risk from the underlying issuers, although this is
mitigated through diversification.
We held investments in fixed income corporate debt securities at June 30,
2012, which were classified as held-to-maturity as we had the intent and
ability to hold these investments until maturity. These investments were
held at amortized cost, which approximated fair value. The fair value was
estimated based on either the quoted market prices for the same or similar
issues or other inputs derived from available market information, which
represented a Level 2 measurement. We held $72 million of these
investments at June 30, 2012, which were included within prepaid
expenses and other in the consolidated balance sheets and matured
during fiscal 2013.
The following table summarizes the estimated fair value of our long-term
obligations and other short-term borrowings compared to the respective
carrying amounts at June 30:
(in millions) 2013 2012
Estimated fair value $ 3,899 $ 3,075
Carrying amount 3,854 2,894
The fair value of our long-term obligations and other short-term borrowings
is estimated based on either the quoted market prices for the same or
similar issues or other inputs derived from available market information,
which represents a Level 2 measurement.
The following table is a summary of the fair value gain/(loss) of our
derivative instruments, based upon the estimated amount that we would
receive (or pay) to terminate the contracts at June 30:
2013 2012
(in millions) Notional Amount Fair Value Gain/(Loss) Notional Amount Fair Value Gain/(Loss)
Pay-floating interest rate swaps $ 1,138 $ (11) $ 773 $ 49
Foreign currency contracts 643 3 658 1
Forward interest rate swaps 250 20 — —
Commodity contracts 24 — 23 (1)
The fair values are based on quoted market prices for the same or similar
instruments, which represents a Level 2 measurement. See Note 10 for
further information regarding fair value measurements.
12. Shareholders' Equity
At June 30, 2013 and 2012, authorized capital shares consisted of the
following: 750 million Class A common shares, without par value; 5 million
Class B common shares, without par value; and 500 thousand non-voting
preferred shares, without par value. The Class A common shares and
Class B common shares are collectively referred to below as “common
shares”. Holders of common shares are entitled to share equally in any
dividends declared by the Board of Directors and to participate equally in
all distributions of assets upon liquidation. Generally, the holders of Class
A common shares are entitled to one vote per share, and the holders of
Class B common shares are entitled to one-fifth of one vote per share on
proposals presented to shareholders for vote. Under certain
circumstances, the holders of Class B common shares are entitled to vote
as a separate class. Only Class A common shares were outstanding at
June 30, 2013 and 2012.
We repurchased $1.15 billion of our common shares, in the aggregate,
through share repurchase programs during fiscal 2013, 2012 and 2011,
as described below. We funded the repurchases with available cash. The
common shares repurchased are held in treasury to be used for general
corporate purposes.
Fiscal 2013
During fiscal 2013, we repurchased 10.2 million common shares having
an aggregate cost of $450 million. The average price paid per common
share was $44.11.
Fiscal 2012
During fiscal 2012, we repurchased 10.3 million common shares having
an aggregate cost of $450 million. The average price paid per common
share was $43.64.
Fiscal 2011
During fiscal 2011, we repurchased 7.5 million common shares having an
aggregate cost of $250 million. The average price paid per common share
was $33.22. In addition, $20 million of common shares repurchased during
fiscal 2010 cash settled during fiscal 2011.