McKesson 2009 Annual Report Download - page 55

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McKESSON CORPORATION
FINANCIAL REVIEW (Continued)
49
Accounts Receivable Sales Facility:
In June 2008, we renewed our accounts receivable sales facility under substantially similar terms to those
previously in place, except that we increased the committed balance from $700 million to $1.0 billion. The renewed
facility expires in June 2009. We anticipate renewing this facility before its expiration. Through this facility,
McKesson Corporation sells certain U.S. Pharmaceutical trade accounts receivable on a non-recourse basis to a
wholly-owned and consolidated subsidiary which then sells these receivables to a special purpose entity (“SPE”),
which is a wholly-owned, bankruptcy-remote subsidiary of McKesson Corporation that is consolidated in our
financial statements. This SPE then sells undivided interests in the receivables to third-party purchaser groups, each
of which includes commercial paper conduits (“Conduits”), which are special purpose corporations administered by
financial institutions.
Sales of undivided interests in the receivables by the SPE to the Conduits are accounted for as a sale in
accordance with SFAS No. 140, “Accounting for Transfers and Servicing of Financial Assets and Extinguishments
of Liabilities,” because we have relinquished control of the receivables. Accordingly, accounts receivable sold
under these transactions are excluded from receivables, net in the accompanying consolidated balance sheets.
Receivables sold and receivables retained by the Company are carried at face value, which due to the short-term
nature of our accounts receivable and terms of the facility, approximates fair value. McKesson receives cash in the
amount of the face value for the receivables sold. No gain or loss is recorded upon sale as fee charges from the
Conduits are based upon a floating yield rate and the period the undivided interests remain outstanding. Fee charges
from the Conduits are accrued at the end of each month. Should we default under the accounts receivable sales
facility, the Conduits are entitled to receive only collections on receivables owned by the SPE.
Information regarding our outstanding balances related to our interests in accounts receivable sold or qualifying
receivables retained is as follows:
(In millions)
March 31,
2009
March 31,
2008
Receivables sold outstanding (1) $ - $ -
Receivables retained, net of allowance for doubtful accounts 4,814 4,251
(1) Deducted from receivables, net in the consolidated balance sheets.
The following table summarizes the activity related to our interests in accounts receivable sold:
Years Ended March 31,
(In millions) 2009 2008 2007
Proceeds from accounts receivable sales $ 5,780 $ 1,075 $ -
Fees and charges (1) (2) 10 2 -
(1) Recorded in operating expenses in the consolidated statements of operations.
(2) Fee charges related to the sale of receivables to the Conduits for the year ended March 31, 2007 were not material.
The delinquency ratio for the qualifying receivables represented less than 1% of the total qualifying receivables
as of March 31, 2009 and 2008.
We continue servicing the receivables sold. No servicing asset is recorded at the time of sale because we do not
receive any servicing fees from third parties or other income related to servicing the receivables. We do not record
any servicing liability at the time of sale as the receivables collection period is relatively short and the costs of
servicing the receivables sold over the servicing period are insignificant. Servicing costs are recognized as incurred
over the servicing period.