McKesson 2009 Annual Report Download - page 54

McKESSON CORPORATION
FINANCIAL REVIEW (Continued)
48
Contractual Obligations:
The table below presents our significant financial obligations and commitments at March 31, 2009:
Years
(In millions) Total Within 1 Over 1 to 3 Over 3 to 5 After 5
On balance sheet
Long-term debt (1) $ 2,509 $ 219 $ 419 $ 848 $ 1,023
Interest on borrowings (2) 1,052 166 293 205 388
Other (3) 683 379 55 44 205
Off balance sheet
Purchase obligations (4) 3,574 3,353 110 82 29
Customer guarantees (5) 114 51 24 1 38
Operating lease obligations (6) 427 105 162 81 79
Total $ 8,359 $ 4,273 $ 1,063 $ 1,261 $ 1,762
(1) Represents maturities of the Company’s long-term obligations including capital lease obligations. See Financial Note 12,
“Long-Term Debt and Other Financing,” for further information.
(2) Primarily represents interest that will be due in the future on our fixed rate long-term debt obligations.
(3) Primarily includes our AWP Litigation accrual and our estimated payments for pension and postretirement plans.
(4) A purchase obligation is defined 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.
(5) Represents primarily 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.
The inventory repurchase agreements mostly range from one to two years. Customer guarantees range from one to five
years and were primarily provided to facilitate financing for certain customers. The majority of our other customer
guarantees are secured by certain assets of the customer. At March 31, 2009, the maximum amounts of inventory
repurchase guarantees and other customer guarantees were $102 million and $10 million. We consider it unlikely that we
would make significant payments under these guarantees and accordingly, no amounts had been accrued at March 31, 2009.
Refer to Financial Note 17, “Financial Guarantees and Warranties,” for further information.
(6) Represents minimum rental payments and the related future interest payments for operating leases. See Financial Note 16,
“Lease Obligations,” for further information.
At March 31, 2009, the liability recorded for uncertain tax positions, excluding associated interest and penalties,
was approximately $526 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.
In addition, our banks and insurance companies have issued $115 million of standby letters of credit and surety
bonds on our behalf mostly 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 and cash equivalents, our accounts receivable
sales facility, short-term borrowings under the revolving credit facility and commercial paper.