McKesson 2008 Annual Report Download - page 52

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McKESSON CORPORATION
FINANCIAL REVIEW (Continued)
45
Operating activities for 2006 benefited from improved working capital balances for our U.S. pharmaceutical
distribution business as purchases from certain of our suppliers became better aligned with customer demand and as
a result, net financial inventory (inventory, net of accounts payable) decreased. Operating activities for 2006 also
benefited from better inventory management. Operating activities for 2006 include a $143 million cash receipt in
connection with an amended agreement entered into with a customer and cash settlement payments of $243 million
for the Securities Litigation cases. Additionally, cash flows from operations for 2006 include a reduction in current
income taxes payable and a reduction in our deferred tax assets which largely pertain to our Securities Litigation
cash settlement payments (including the $962 million placed in escrow), which was deducted in our 2006 income
tax return.
Net cash used in investing activities was $5 million in 2008, compared with $2,108 million in 2007 and $1,813
million in 2006. Investing activities for 2008 benefited from the $962 million release of restricted cash for our
Consolidated Securities Litigation Action. Investing activities include $610 million in 2008 of cash paid for
business acquisitions, including $531 million for OTN. Investing activities for 2007 reflect $1,938 million of cash
paid for our business acquisitions (including $1.8 billion for Per-Se) and $36 million for our investment in Parata.
Investing activities for 2007 also reflect $179 million of cash proceeds from the sale of our businesses, including
$164 million for the sale of our Acute Care business. Investing activities for 2006 reflect $589 million of cash paid
for our business acquisitions, including $479 million for D&K, and a use of cash of $962 million due to a transfer of
cash to an escrow account for future payment of our Consolidated Securities Litigation Action. Partially offsetting
these increases were cash proceeds of $63 million pertaining to the sale of BioServices.
Financing activities utilized cash of $1,470 million in 2008, provided cash of $379 million in 2007 and utilized
cash of $583 million in 2006. Financing activities for 2008 include $1.7 billion of cash paid for stock repurchases,
partially offset by $354 million of cash receipts from common stock issuances. Cash received from common stock
issuances primarily represent employees’ exercises of stock options.
Financing activities for 2007 include our March 2007 issuance of $500 million of 5.25% notes due 2013 and
$500 million of 5.70% notes due 2017. Net proceeds from the issuance after offering expenses of the notes of $990
million were used, together with cash on hand, to repay $1.0 billion of short-term borrowings then outstanding under
the interim facility we entered into in connection with the acquisition of Per-Se. Financing activities for 2007 also
include $1.0 billion of cash paid for stock repurchases, partially offset by $399 million of cash receipts from
common stock issuances.
Financing activities for 2006 include $958 million of cash paid for stock repurchases and $102 million of cash
paid for the repayment of life insurance policy loans, partially offset by $568 million of cash receipts from common
stock issuances.
The Company’ s Board of Directors (the “Board”) approved share repurchase plans in October 2003, August
2005, December 2005 and January 2006 which permitted the Company to repurchase up to a total of $1.0 billion
($250 million per plan) of the Company’ s common stock. Under these plans, we repurchased 19 million shares for
$958 million during 2006. As of March 31, 2006, less than $1 million remained available for future repurchases
under the January 2006 plan and all of these other plans were completed.
In April and July 2006, the Board approved two new share repurchase plans which permitted the Company to
repurchase up to an additional $1.0 billion ($500 million per plan) of the Company’ s common stock. During 2007,
we repurchased a total of 20 million shares for $1.0 billion. As a result of these repurchases, we effectively
completed all of the pre-2007 and 2007 share repurchase plans.
In April and September 2007, the Board approved two new plans to repurchase up to $2.0 billion of the
Company’ s common stock ($1.0 billion per plan). In 2008, we repurchased a total of 28 million shares for $1,686
million, fully utilizing the April 2007 plan, leaving $314 million remaining on the September 2007 plan. In April
2008, the Board approved a new plan to repurchase an additional $1.0 billion of the Company’ s common stock.
Stock repurchases may be made from time-to-time in open market or private transactions.