McKesson 2009 Annual Report Download - page 103

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McKESSON CORPORATION
FINANCIAL NOTES (Continued)
97
In January 2007, we entered into a $1.8 billion interim credit facility. The interim credit facility was a single-
draw 364-day unsecured facility with terms substantially similar to those contained in the Company’s existing
revolving credit facility. We utilized $1.0 billion of this facility to fund a portion of our purchase of Per-Se.
Commercial Paper
We issued and repaid approximately $3.3 billion and $260 million in commercial paper during 2009 and 2008.
There were no commercial paper issuances outstanding at March 31, 2009 and 2008.
Employee Stock Ownership Program
The employee stock ownership program (“ESOP”) debt bears interest at an 8.6% fixed rate and is due in semi-
annual installments through June 2010.
Debt Covenants
Our various borrowing facilities and certain long-term debt instruments are subject to covenants. Our principal
debt covenant is our debt to capital ratio, which cannot exceed 56.5%. If we exceed this ratio, repayment of debt
outstanding under the revolving credit facility and $215 million of term debt could be accelerated. At March 31,
2009, this ratio was 28.9% and we were in compliance with all other covenants.
13. Pension Benefits
We maintain a number of qualified and nonqualified defined pension benefit plans and defined contribution
plans for eligible employees.
Defined Pension Benefit Plans
Eligible U.S. employees who were employed by the Company prior to December 31, 1996 are covered under
the Company-sponsored defined benefit retirement plan. In 1997, we amended this plan to freeze all plan benefits
based on each employee’s plan compensation and creditable service accrued to that date. The Company has made
no annual contributions since this plan was frozen. The benefits for this defined benefit retirement plan are based
primarily on age of employees at date of retirement, years of service and employees’ pay during the five years prior
to retirement. We also have defined benefit pension plans for eligible Canadian and United Kingdom employees as
well as a nonqualified supplemental defined benefit plan for certain U.S. executives, which is non-funded. We also
assumed a frozen qualified defined benefit plan through our acquisition of Per-Se in 2007. The Per-Se plan was
merged into our retirement plan in 2008. We adopted the measurement provisions of SFAS No. 158 in the fourth
quarter of 2009. As required, our defined benefit plan assets and obligations are now measured as of the Company’s
fiscal year-end. We previously performed this measurement at December 31.
The net periodic expense for our pension plans is as follows:
Years Ended March 31,
(In millions) 2009 2008 2007
Service cost—benefits earned during the year $ 6 $ 7 $ 7
Interest cost on projected benefit obligation 33 31 27
Expected return on assets (39) (39) (33)
Amortization of unrecognized actuarial loss, prior
service costs and net transitional obligation 10 11 12
Settlement charges and other 1 4 4
Net periodic pension expense $ 11 $ 14 $ 17