McKesson 2008 Annual Report Download - page 54

McKESSON CORPORATION
FINANCIAL REVIEW (Continued)
47
Financial Obligations and Commitments:
The table below presents our significant financial obligations and commitments at March 31, 2008:
Years
(In millions) Total Within 1 Over 1 to 3 Over 3 to 5 After 5
On balance sheet
Long-term debt $ 1,797 $ 2 $ 217 $ 903 $ 675
Other (1) 349 29 51 54 215
Off balance sheet
Purchase obligations 3,607 3,288 144 90 85
Interest on borrowings 799 118 216 164 301
Customer guarantees 122 46 21 1 54
Operating lease obligations 488 114 171 104 99
Total $ 7,162 $ 3,597 $ 820 $ 1,316 $ 1,429
(1) Primarily includes estimated payments for pension and postretirement plans.
We define a purchase obligation as an arrangement to purchase goods or services that is enforceable and legally
binding on the Company. These obligations primarily relate to inventory purchases, capital commitments and
service agreements. At March 31, 2008, the liability recorded for uncertain tax positions, excluding associated
interest and penalties, was approximately $496 million pursuant to FIN No. 48, “Accounting for Uncertainty in
Income Taxes.” This liability represents an estimate of tax positions that the Company has taken in its tax returns
which may ultimately not be sustained upon examination by the tax authorities. Since the ultimate amount and
timing of any future cash settlements cannot be predicted with reasonable certainty, the estimated FIN No. 48
liability has been excluded from the contractual obligations table.
We have agreements with certain of our customers’ financial institutions (primarily for our Canadian business)
under which we have guaranteed the repurchase of inventory at a discount in the event these customers are unable to
meet certain obligations to those financial institutions. Among other limitations, these inventories must be in
resalable condition. Customer guarantees range from one to seven years and were primarily provided to facilitate
financing for certain strategic customers. At March 31, 2008, the maximum amounts of inventory repurchase
guarantees and other customer guarantees were $115 million and $5 million. We consider it unlikely that we would
make significant payments under these guarantees, and accordingly, amounts accrued for these guarantees were
nominal.
In addition, our banks and insurance companies have issued $101 million of standby letters of credit and surety
bonds on our behalf in order to meet the security requirements for statutory licenses and permits, court and fiduciary
obligations, and our workers’ compensation and automotive liability programs.
Credit Resources:
We fund our working capital requirements primarily with cash, short-term borrowings and our receivables sales
facility. In June 2007, we renewed our existing $1.3 billion five-year, senior unsecured revolving credit facility,
which was scheduled to expire in September 2009. The new credit facility has terms and conditions substantially
similar to those previously in place and expires in June 2012. Borrowings under this new credit facility bear interest
based upon either a Prime rate or the London Interbank Offering Rate. At March 31, 2008 and March 31, 2007, no
amounts were outstanding under this facility.
In June 2007, we renewed our $700 million committed accounts receivable sales facility. The facility was
renewed under substantially similar terms to those previously in place. We intend to renew this facility prior to its
expiration in June 2008. At March 31, 2008 and March 31, 2007, no amounts were outstanding under this facility.