McKesson 2011 Annual Report Download - page 87

Download and view the complete annual report

Please find page 87 of the 2011 McKesson annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 130

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98
  • 99
  • 100
  • 101
  • 102
  • 103
  • 104
  • 105
  • 106
  • 107
  • 108
  • 109
  • 110
  • 111
  • 112
  • 113
  • 114
  • 115
  • 116
  • 117
  • 118
  • 119
  • 120
  • 121
  • 122
  • 123
  • 124
  • 125
  • 126
  • 127
  • 128
  • 129
  • 130

McKESSON CORPORATION
FINANCIAL NOTES (Continued)
81
Revolving Credit Facility
We have a syndicated $1.3 billion five-year senior unsecured revolving credit facility, which expires in June
2012. Borrowings under this credit facility bear interest based upon either a Prime rate or the London Interbank
Offered Rate. There were no borrowings under this facility in 2011 or 2010 and $279 million for 2009. As of
March 31, 2011 and 2010, there were no amounts outstanding under this facility.
Commercial Paper
There were no commercial paper issuances during 2011 and 2010 and no amount outstanding at March 31, 2011
and 2010. We issued and repaid $3.3 billion of commercial paper in 2009.
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%. If we
exceed this ratio, repayment of debt outstanding under the revolving credit facility could be accelerated. As of
March 31, 2011, this ratio was 35.7% and we were in compliance with our other financial covenants.
12. Pension Benefits
We maintain a number of qualified and nonqualified defined pension benefit plans and defined contribution
plans for eligible employees.
Defined Pension Benefit Plans
Eligible U.S. employees who were employed by the Company prior to December 31, 1996 are covered under
the Company-sponsored defined benefit retirement plan. In 1997, we amended this plan to freeze all plan benefits
based on each employee’s plan compensation and creditable service accrued to that date. The Company has made
no annual contributions since this plan was frozen. The benefits for this defined benefit retirement plan are based
primarily on age of employees at date of retirement, years of service and employees’ pay during the five years prior
to retirement. 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.
The net periodic expense for our pension plans is as follows:
Years Ended March 31,
(In millions)
2011
2010
2009
Service cost—benefits earned during the year
$
6
$
4
$
6
Interest cost on projected benefit obligation
31
35
33
Expected return on assets
(29)
(24)
(39)
Amortization of unrecognized actuarial loss, prior
service costs and net transitional obligation
28
25
10
Settlement charges and other
—
—
1
Net periodic pension expense
$
36
$
40
$
11
The projected unit credit method is utilized in measuring net periodic pension expense over the employees’
service life for the U.S. pension plans. Unrecognized actuarial losses exceeding 10% of the greater of the projected
benefit obligation or the market value of assets are amortized straight-line over the average remaining future service
periods.