McKesson 2012 Annual Report Download - page 50

McKESSON CORPORATION
FINANCIAL REVIEW (Continued)
46
In 2012 and 2011, the majority of our share repurchases were transacted through a number of ASR programs
with third party financial institutions as follows: $1.0 billion in May 2010, $275 million in March 2011,
$650 million in May 2011 and $1.2 billion in March 2012. In 2010, all of our share repurchases were conducted
through open market transactions. All programs were funded with cash on hand.
In March 2012, we entered into an ASR program with a third party financial institution to repurchase $1.2
billion of the Company’s common stock. As of March 31, 2012, we had received 12 million shares representing the
minimum number of shares due under this program, and the average price paid per share of $87.19 was based on the
average daily volume-weighted average price of our common stock less a discount calculated as of March 31, 2012.
The total number of shares to be ultimately repurchased by us and the final settlement price per share will be
determined at the completion of this program based on the average daily volume-weighted average price of our
common stock during the program, less a discount. This program is anticipated to be completed no later than the
second quarter of 2013.
In April 2012, the Board authorized the repurchase of an additional $700 million of the Company’s common
stock, bringing the total authorization outstanding to $1.0 billion.
Although we believe that our operating cash flow, financial assets, current access to capital and credit markets,
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) 2012 2011 2010
Cash and cash equivalents $ 3,149 $ 3,612 $ 3,731
Working capital 1,917 3,631 4,492
Debt, net of cash and cash equivalents 831 392 (1,434)
Debt to capital ratio
(
1
)
36.8% 35.7% 23.4%
N
et debt to net capital employed
(
2
)
10.8% 5.1% (23.5)%
Return on stockholders’ equity
(
3
)
19.7% 16.9% 18.7%
(1) Ratio is computed as total debt divided by the sum of total debt and stockholders’ equity.
(2) Ratio is computed as total debt, net of cash and cash equivalents (“net debt”), divided by the sum of net debt and
stockholders’ equity (“net capital employed”).
(3) Ratio is computed as net income for the last four quarters, divided by a five-quarter average of stockholders’ equity.
Our cash and equivalents balance as of March 31, 2012 included approximately $1.4 billion of cash held by our
subsidiaries outside of the United States. Our primary intent is to utilize this cash in the foreign operations as well
as to fund certain research and development activities for an indefinite period of time. 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. During the fourth quarter of 2011 and pursuant to IRS regulations, we temporarily borrowed and
repaid $1.0 billion of cash held by our subsidiaries outside the United States. The duration of this temporary loan to
the United States was less than 60 days.
Working capital primarily includes cash and cash equivalents, receivables and inventories, net of drafts and
accounts payable, deferred revenue 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
other requirements.