McKesson 2010 Annual Report Download - page 52

McKESSON CORPORATION
FINANCIAL REVIEW (Continued)
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Contractual Obligations:
The table below presents our significant financial obligations and commitments at March 31, 2010:
Years
(In millions) Total Within 1 Over 1 to 3 Over 3 to 5 After 5
On balance sheet
Long-term debt (1) $ 2,296 $ 3 $ 919 $ 350 $ 1,024
Other (2) 300 22 48 128 102
Off balance sheet
Interest on borrowings (3) 879 149 258 156 316
Purchase obligations (4) 3,272 3,059 121 66 26
Customer guarantees (5) 146 64 25 6 51
Operating lease obligations (6) 363 106 140 67 50
Total $ 7,256 $ 3,403 $ 1,511 $ 773 $ 1,569
(1) Represents maturities of the Company’s long-term obligations including an immaterial amount of capital lease obligations.
See Financial Note 12, “Long-Term Debt and Other Financing,” for further information.
(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 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, 2010, the maximum amounts of inventory
repurchase guarantees and other customer guarantees were $124 million and $17 million. We consider it unlikely that we
would make significant payments under these guarantees and accordingly, no amounts had been accrued at March 31, 2010.
Refer to Financial Note 17, “Financial Guarantees and Warranties,” for further information.
(6) Represents minimum rental payments for operating leases. See Financial Note 16, “Lease Obligations,” for further
information.
At March 31, 2010, the liability recorded for uncertain tax positions, excluding associated interest and penalties,
was approximately $514 million. 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
liability has been excluded from the contractual obligations table.
In addition, at March 31, 2010, our banks and insurance companies have issued $111 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.