McKesson 2011 Annual Report Download - page 51

McKESSON CORPORATION
FINANCIAL REVIEW (Continued)
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Net cash flow from operating activities was $2,338 million in 2011 compared to $2,316 million in 2010 and
$1,351 million in 2009. Operating activities for 2011 included a non-cash charge of $213 million and the related
income tax benefit of $64 million for the AWP litigation charge. Operating activities for 2011 also reflect an
increase in receivables primarily associated with revenue growth, partially offset by improved management of
inventories and longer payment terms for certain purchases. Cash flows from operations can also be significantly
affected by factors such as the timing of receipts from customers and payments to vendors.
Operating activities for 2010 were primarily affected by improved management of drafts and accounts payable,
partially offset by an increase in inventories due to our revenue growth and the AWP litigation private payer
settlement payments of $350 million.
Operating activities for 2009 included a non-cash charge of $493 million and the related income tax benefit of
$182 million for the AWP litigation charge. Operating activities for 2009 also reflect an increase in receivables
primarily associated with our revenue growth as well as longer payment terms for certain customers and
improvement in our net financial inventory (inventory, net of drafts and accounts payable).
Net cash used in investing activities was $624 million in 2011 compared to $309 million in 2010 and
$727 million in 2009. Investing activities for 2011 included $292 million of cash payments for business
acquisitions, including approximately $244 million for our acquisition of US Oncology, and $109 million of cash
received from the sale of MAP. Investing activities in 2011 also included $233 million and $155 million in capital
expenditures for property acquisitions and capitalized software. Investing activities for 2010 included $199 million
and $179 million in capital expenditures for property acquisitions and capitalized software and the release of
$55 million of restricted cash from escrow related to the AWP private litigation settlement payments. Investing
activities for 2009 included $358 million of cash payments for business acquisitions, including the McQueary
Brothers acquisition for approximately $190 million.
Financing activities utilized cash of $1,841 million in 2011 and $421 million in 2010, and provided cash of
$178 million in 2009. Financing activities for 2011 reflect $1,689 million of cash received from the issuance of
long-term debt. In February 2011 we issued $600 million of 3.25% notes due 2016, $600 million of 4.75% notes
due 2021, and $500 million of 6.00% notes due 2041. Net proceeds from the issuance of the long-term notes, after
discounts and offering expenses, were used to pay off the $1,730 million of debt assumed as part of the acquisition
of US Oncology. Also as part of our acquisition of US Oncology, we borrowed $1,000 million for bridge financing
which was fully repaid by February 2011. Financing activities for 2011 also included $2,050 million of cash paid
for share repurchases, $171 million of dividends paid and $367 million of cash receipts from employees’ exercises
of stock options.
Financing activities for 2010 included $323 million in cash paid for share repurchases and $218 million in cash
paid on our long-term debt, which primarily consisted of $215 million paid on the maturity of our 9.13% Series C
Senior Notes in March 2010. Financing activities for 2010 also included $323 million of cash paid for share
repurchases, $131 million of dividends paid and $212 million of cash receipts from employees’ exercises of stock
options.
Financing activities for 2009 included our February 2009 issuance of $350 million of 6.50% notes due 2014 and
$350 million of 7.50% notes due 2019. Net proceeds of $693 million from the issuance of the notes, after discounts
and offering expenses, were used by the Company for general corporate purposes. Financing activities for 2009 also
included $502 million of cash paid for share repurchases, $116 million of dividends paid and $97 million of cash
receipts from employees’ exercises of stock options.
The Company’s Board has authorized the repurchase of McKesson’s common stock from time-to-time in open
market transactions, privately negotiated transactions, through accelerated share repurchase programs, or by any
combination of such methods. The timing of any repurchases and the actual number of shares repurchased will
depend on a variety of factors, including our stock price, corporate and regulatory requirements, restrictions under
our debt obligations and other market and economic conditions. As of March 31, 2011, $500 million remained
available for future repurchases under the October 2010 Board approved share repurchase plan. In April 2011, the
Board authorized the repurchase of up to an additional $1.0 billion of the Company’s common stock.