McKesson 2012 Annual Report Download - page 84

McKESSON CORPORATION
FINANCIAL NOTES (Continued)
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The delinquency ratio for the qualifying receivables represented less than 1% of the total qualifying receivables
as of March 31, 2012 and 2011.
Revolving Credit Facility
In September 2011, we renewed our existing syndicated $1.3 billion five-year senior unsecured revolving credit
facility, which was scheduled to mature in June 2012. This renewed credit facility has terms and conditions
substantially similar to those previously in place and matures in September 2016. Borrowings under this renewed
credit facility bear interest based upon either the London Interbank Offered Rate or a prime rate. There were no
borrowings under this credit facility during 2012, 2011 and 2010. As of March 31, 2012 and 2011, there were no
borrowings outstanding under this credit facility.
Commercial Paper
There were no commercial paper issuances during 2012, 2011 and 2010 and no amount outstanding at March
31, 2012 and 2011.
Debt Covenants
Our various borrowing facilities and long-term debt are subject to certain covenants. Our principal debt
covenant is our debt to capital ratio under our unsecured revolving credit facility, which cannot exceed 56.5%. For
the purpose of calculating this ratio, borrowings under the accounts receivable sales facility are excluded. If we
exceed this ratio, repayment of debt outstanding under the revolving credit facility could be accelerated. As of
March 31, 2012, we were in compliance with our financial covenants.
13. Variable Interest Entities
We are involved with VIEs, which we do not consolidate because we do not have the power to direct the
activities that most significantly impact their economic performance and thus are not considered the primary
beneficiary of the entities. Our relationships include equity investment, lending, leasing, contractual or other
relationships with the VIEs. Our most significant relationships are with oncology and other specialty practices.
Under these practice arrangements, we generally own or lease all of the real estate and the equipment used by the
affiliated practices and manage the practices’ administrative functions. Our maximum exposure to loss (regardless
of probability) as a result of all VIEs was $1.1 billion and $1.2 billion at March 31, 2012 and 2011, which primarily
represents the value of intangible assets related to service agreements and lease and loan receivables. These
amounts exclude the customer loan guarantees discussed in Financial Note 18, “Financial Guarantees and
Warranties.” We believe that there is no material loss exposure on these assets or from these relationships.
14. Pension Benefits
We maintain a number of qualified and nonqualified defined benefit pension plans and defined contribution
plans for eligible employees.
Defined Benefit Pension Plans
Eligible U.S. employees who were employed by the Company as of December 31, 1995 are covered under the
Company-sponsored defined benefit retirement plan. In 1997, the plan was amended to freeze all plan benefits as of
December 31, 1996. Benefits for the defined benefit retirement plan are based primarily on age of employees at date
of retirement, years of creditable service and the average of the highest 60 months of pay during the 15 years prior to
the plan freeze date. We also have defined benefit pension plans for eligible Canadian and United Kingdom
employees as well as an unfunded nonqualified supplemental defined benefit plan for certain U.S. executives.
Defined benefit plan assets and obligations are measured as of the Company’s fiscal year-end.