McKesson 2008 Annual Report Download - page 109

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McKESSON CORPORATION
FINANCIAL NOTES (Continued)
102
20. Related Party Balances and Transactions
Notes receivable outstanding from certain of our current and former officers and senior managers totaled $16
million and $25 million at March 31, 2008 and 2007. These notes related to purchases of common stock under our
various employee stock purchase plans. The notes bear interest at rates ranging from 4.7 % to 7.1 % and were due at
various dates through February 2004. Interest income on these notes is recognized only to the extent that cash is
received. These notes, which are included in other capital in the consolidated balance sheets, were issued for
amounts equal to the market value of the stock on the date of the purchase and are at full recourse to the borrower.
At March 31, 2008, the value of the underlying stock collateral was $10 million. The collectability of these notes is
evaluated on an ongoing basis. As a result, we recorded net credits of $2 million and $9 million in 2007 and 2006
based on changes in price of the underlying stock collateral. At March 31, 2008 and 2007, we provided a reserve of
approximately $6 million for the outstanding notes. Other receivable balances held with related parties, consisting
of loans made to certain officers and senior managers and an equity-held investment, at March 31, 2008 and 2007
amounted to $1 million.
In 2008, 2007 and 2006 we incurred $10 million, $8 million and $7 million of annual rental expense paid to an
equity-held investment. In addition, in 2007 and 2006 we purchased $3 million of services per year from an equity-
held investment. At March 31, 2008, we had a $7 million loan receivable from an equity-held investment. The loan
bears interest at 7.9%.
21. Segments of Business
Beginning with the first quarter of 2008, we report our operations in two operating segments: McKesson
Distribution Solutions and McKesson Technology Solutions. This change resulted from a realignment of our
businesses to better coordinate our operations with the needs of our customers. The factors for determining the
reportable segments included the manner in which management evaluated the performance of the Company
combined with the nature of the individual business activities. We evaluate the performance of our operating
segments based on operating profit before interest expense, income taxes and results from discontinued operations.
In accordance with SFAS No. 131, “Disclosures about Segments of an Enterprise and Related Information,” all prior
period amounts are reclassified to conform to the 2008 segment presentation.