McKesson 2009 Annual Report Download - page 53

McKESSON CORPORATION
FINANCIAL REVIEW (Continued)
47
Our cash and equivalents balance as of March 31, 2009 included approximately $900 million of cash held by
our subsidiaries outside of the United States. Although the vast majority of cash held outside the United States is
available for repatriation, doing so could subject us to U.S. federal, state and local income tax. We may temporarily
access cash held by foreign subsidiaries without subjecting us to U.S. federal, state and local income tax through
intercompany loans. A notice issued by the IRS in January 2009 announced that the Treasury Department will, for a
temporary period, extend the permitted duration of such intercompany loans that qualify for suspended deemed
dividend treatment under Section 956 of the Internal Revenue Code of 1986, as amended. Pursuant to the IRS
notice, such intercompany loans from foreign subsidiaries to the U.S. parent must be less than 60 days in duration
and borrowing activities cannot exceed 180 cumulative days during the year. At March 31, 2009, there were no
intercompany loans outstanding. The position set forth in the notice will apply for the Company until March 31,
2011.
Working capital primarily includes cash and cash equivalents, receivables, inventories, net of drafts and
accounts payable and other current liabilities. Our Distribution Solutions segment requires a substantial investment
in working capital that is susceptible to large variations during the year as a result of inventory purchase patterns and
seasonal demands. Inventory purchase activity is a function of sales activity and new customer build-up
requirements.
Consolidated working capital increased at March 31, 2009 compared with March 31, 2008 primarily due to
increases in cash and cash equivalents and accounts receivable, partially offset by our $493 million AWP Litigation
accrual and a higher current portion of long-term debt. Consolidated working capital decreased at March 31, 2008
compared with March 31, 2007 primarily due to a decrease in cash and cash equivalents, a decrease in net financial
inventory (inventory, net of drafts and accounts payable) and an increase in other accrued liabilities. These
decreases in working capital were partially offset by an increase in account receivables and the one-time benefit
associated with a $420 million reclassification of short-term tax liabilities to long-term liabilities as a result of our
implementation of FIN No. 48.
Our ratio of net debt to net capital employed decreased at March 31, 2009 compared with March 31, 2008
primarily reflecting an increase in cash and cash equivalents, partially offset by our issuance of $700 million of
long-term debt. This ratio increased at March 31, 2008 compared with March 31, 2007 primarily reflecting a
decrease in cash and cash equivalents.
The Company has paid quarterly cash dividends at the rate of $0.06 per share on its common stock since the
fourth quarter of 1999. A dividend of $0.06 per share was declared by the Board on January 23, 2008 and was paid
on April 1, 2008 to stockholders of record at the close of business on March 3, 2008. 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. In 2009, 2008 and 2007, we
paid total cash dividends of $116 million, $70 million and $72 million.