McKesson 2012 Annual Report Download - page 51

McKESSON CORPORATION
FINANCIAL REVIEW (Continued)
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Consolidated working capital decreased at March 31, 2012 compared to March 31, 2011 primarily due to
increases in drafts and accounts payable and other accrued liabilities, partially offset by increases in receivables and
inventories. Consolidated working capital decreased at March 31, 2011 compared to March 31, 2010, primarily due
to increases in drafts and accounts payables, other accrued liabilities and the current portion of long-term debt,
partially offset by an increase in receivables.
Our ratio of net debt to net capital employed increased at March 31, 2012 compared to March 31, 2011
primarily due to a lower cash and cash equivalents balance. Our ratio of net debt to net capital employed increased
at March 31, 2011 compared to March 31, 2010 primarily due to an increase in total debt as a result of the US
Oncology acquisition.
In May 2010, the quarterly dividend was raised from $0.12 to $0.18 per common share and in April 2011, the
quarterly dividend was raised from $0.18 to $0.20 per common share. 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 2012, 2011 and 2010, we paid total cash dividends of $195 million, $171 million
and $131 million.
Contractual Obligations:
The table below presents our significant financial obligations and commitments at March 31, 2012:
Years
(In millions) Total Within 1 Over 1 to 3 Over 3 to 5 After 5
On balance sheet
Long-term debt (1) $ 3,580 $ 508 $ 353 $ 1,100 $ 1,619
Other (2) 405 49 180 66 110
Off balance sheet
Interest on borrowings (3) 1,787 195 313 269 1,010
Purchase obligations (4) 576 476 90 10 —
Operating lease obligations (5)
868 188 280 167 233
Customer guarantees (6) 166 107 35 3 21
Total $ 7,382 $ 1,523 $ 1,251 $ 1,615 $ 2,993
(1) Represents maturities of the Company’s long-term obligations including an immaterial amount of capital lease obligations.
(2) Represents our estimated benefit payments for the unfunded benefit plans and minimum funding requirements for the
pension plans.
(3) Primarily represents interest that will become due on our fixed rate long-term debt obligations.
(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 minimum rental payments for operating leases.
(6) Represents primarily agreements with certain of our Canadian customers’ financial institutions under which we have
guaranteed the repurchase of our customers’ inventory or our customers’ debt in the event these customers are unable to
meet their obligations to those financial institutions. We also have an agreement with one software customer that, under
limited circumstances, may require us to secure standby financing. Because the amount of the standby financing is not
explicitly stated, the overall amount of this guarantee cannot reasonably be estimated.
At March 31, 2012, the liability recorded for uncertain tax positions, excluding associated interest and penalties,
was approximately $504 million. Since the ultimate amount and timing of any future cash settlements cannot be
predicted with reasonable certainty, the estimated liability has been excluded from the contractual obligations table.
In addition, at March 31, 2012, our banks and insurance companies have issued $86 million of standby letters of
credit and surety bonds, which were issued on our behalf mostly related to our customer contracts and in order to
meet the security requirements for statutory licenses and permits, court and fiduciary obligations and our workers’
compensation and automotive liability programs.