Cardinal Health 2014 Annual Report Download - page 46

Cardinal Health, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
44
The following tables summarize the outstanding cash flow
hedges at June 30:
2014
(in millions) Notional Amount Maturity Date
Forward interest rate
swaps $ 300 Jun 2025 -Oct 2026
Foreign currency
contracts 182 Jul 2014 -Jun 2015
Commodity contracts 24 Jul 2014 -Mar 2017
2013
(in millions) Notional Amount Maturity Date
Forward interest rate
swaps $ 250 Jun 2025
Foreign currency
contracts 164 Jul 2013 - Jun 2014
Commodity contracts 24 Jul 2013 - Mar 2016
The following table summarizes the gain/(loss) included in AOCI
for derivative instruments designated as cash flow hedges at
June 30:
(in millions) 2014 2013
Forward interest rate swaps $ 9 $ 20
Commodity contracts 1—
Foreign currency contracts (1) 3
The following table summarizes the gain/(loss) reclassified from
AOCI into earnings for derivative instruments designated as
cash flow hedges:
(in millions) 2014 2013 2012
Foreign currency contracts (1) $ — $ 1 $ 1
Foreign currency contracts (2) 21 (1)
Foreign currency contracts (3) 11 (1)
Commodity contracts (3) —1 2
Forward interest rate swaps (4) —1 —
(1) Included in revenue in the consolidated statements of earnings.
(2) Included in cost of products sold in the consolidated statements of
earnings.
(3) Included in SG&A expenses in the consolidated statements of earnings.
(4) Included in interest expense, net in the consolidated statements of
earnings.
The amount of ineffectiveness associated with these derivative
instruments was immaterial for all periods presented.
Economic (Non-Designated) Hedges
We enter into foreign currency contracts to manage our foreign
exchange exposure related to intercompany financing
transactions and other balance sheet items subject to
revaluation that do not meet the requirements for hedge
accounting treatment. Accordingly, these derivative instruments
are adjusted to current market value at the end of each period
through earnings. The gain or loss recorded on these
instruments is substantially offset by the remeasurement
adjustment on 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:
2014
(in millions) Notional Amount Maturity Date
Foreign currency
contracts $ 461 Jul 2014 -Sep 2014
2013
(in millions) Notional Amount Maturity Date
Foreign currency
contracts $ 479 Jul 2013 - Sep 2013
The following table summarizes the gain/(loss) recognized in
earnings for economic (non-designated) derivative instruments:
(in millions) 2014 2013 2012
Foreign currency contracts (1) $ 12 $ 6 $ (39)
Commodity contracts (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, 2014 and June 30, 2013 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.
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) 2014 2013
Estimated fair value $ 4,115 $ 3,899
Carrying amount 3,972 3,854
The estimated 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.