McKesson 2009 Annual Report Download - page 52

McKESSON CORPORATION
FINANCIAL REVIEW (Continued)
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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 of $997 million from the issuance of the notes, after offering
expenses, 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 and $72 million of dividends paid, partially offset by
$399 million of cash receipts from common stock issuances.
The Company’s Board of Directors (the “Board”) has authorized the repurchase of McKesson’s common stock
from time to time in open market or private transactions, which is described in more detail in Financial Note 19,
“Stockholders’ Equity,” to the accompanying consolidated financial statements. During 2009, 2008 and 2007, the
Company repurchased $484 million, $1,686 million and $1,001 million of its common stock at average prices of
$50.52, $59.48 and $51.46. As of March 31, 2009, $830 million remained available for future repurchases under the
outstanding April 2008 Board approved share repurchase plan.
In July 2008, the Board authorized the retirement of shares of the Company’s common stock that may be
repurchased from time to time pursuant to its stock repurchase program. During the second quarter of 2009, all of
the 4 million repurchased shares, which we purchased for $204 million, were formally retired by the Company. The
retired shares constitute authorized but unissued shares. We elected to allocate any excess of share repurchase price
over par value between additional paid-in capital and retained earnings. As such, $165 million was recorded as a
decrease to retained earnings.
In April 2008, the Board approved a change in the Company’s dividend policy by increasing the amount of the
Company’s quarterly dividend from six cents to twelve cents per share, applicable to ensuing quarterly dividend
declarations until further action by the Board. The Company anticipates that it will continue to pay quarterly cash
dividends in the future. However, the payment and amount of future dividends remain within the discretion of the
Board and will depend upon the Company’s future earnings, financial condition, capital requirements and other
factors.
Although we believe that our operating cash flow, financial assets, current access to capital and credit markets,
as evidenced by our most recent debt issuance in February 2009, including our existing credit and sales facilities,
will give us the ability to meet our financing needs for the foreseeable future, there can be no assurance that
continued or increased volatility and disruption in the global capital and credit markets will not impair our liquidity
or increase our costs of borrowing.
Selected Measures of Liquidity and Capital Resources:
March 31,
(Dollars in millions) 2009 2008 2007
Cash and cash equivalents $ 2,109 $ 1,362 $ 1,954
Working capital 3,065 2,438 2,730
Debt, net of cash and cash equivalents 403 435 4
Debt to capital ratio (1) 28.9% 22.7% 23.8%
Net debt to net capital employed (2) 6.1% 6.6% 0.1%
Return on stockholders’ equity (3) 13.2% 15.6% 15.2%
(1) Ratio is computed as total debt divided by total debt and stockholders’ equity.
(2) Ratio is computed as total debt, net of cash and cash equivalents (“net debt”), divided by net debt and stockholders’ equity
(“net capital employed”).
(3) Ratio is computed as net income, divided by a five-quarter average of stockholders’ equity.