McKesson 2011 Annual Report Download - page 93

Download and view the complete annual report

Please find page 93 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)
87
Defined Contribution Plans
We have a contributory profit sharing investment plan (“PSIP”) for U.S. employees not covered by collective
bargaining arrangements. Effective January 1, 2011, eligible employees may contribute to the PSIP up to 75% of
their monthly eligible compensation for pre-tax contributions and up to 75% of compensation for catch-up
contributions not to exceed IRS limits. The Company makes matching contributions in an amount equal to 100% of
the employee’s first 3% of pay contributed and 50% for the next 2% of pay contributed. The Company also may
make an additional annual matching contribution for each plan year to enable participants to receive a full match
based on their annual contribution.
The Company’s leveraged employee stock ownership plan (“ESOP”) had purchased an aggregate of 24 million
shares of the Company’s common stock since its inception. These purchases were financed by 10 to 20 year loans
from or guaranteed by us. At March 31, 2011 and 2010, there were no outstanding ESOP loans nor the related
receivables from the ESOP as the ESOP fully repaid the loans during 2010. The loans were repaid by the ESOP
from interest earnings on cash balances and common dividends on unallocated shares and Company cash
contributions. The ESOP loan maturities and rates were identical to the terms of related Company borrowings.
Stock was made available from the ESOP based on debt service payments on ESOP borrowings. In 2011 and 2009,
the Company made contributions primarily in cash or with the issuance of treasury shares. In the first quarter of
2011, all of the 24 million common shares had been allocated to plan participants. As a result, future PSIP
contributions will be funded with cash or treasury shares.
The McKesson Corporation PSIP was a member of the settlement class in the Consolidated Securities Litigation
Action. On April 27, 2009, the court issued an order approving the distribution of the settlement funds. On October
9, 2009, the PSIP received approximately $119 million of the Consolidated Securities Litigation Action proceeds.
Approximately $42 million of the proceeds were attributable to the allocated shares of McKesson common stock
owned by the PSIP participants during the Consolidated Securities Litigation Action class-holding period and were
allocated to the respective participants on that basis in the third quarter of 2010. Approximately $77 million of the
proceeds were attributable to the unallocated shares (the “Unallocated Proceeds”) of McKesson common stock
owned by the PSIP in an ESOP suspense account. In accordance with the plan terms, the PSIP distributed all of the
Unallocated Proceeds to current PSIP participants after the close of the plan year in April 2010. The receipt of the
Unallocated Proceeds by the PSIP was reimbursement for the loss in value of the Company’s common stock held by
the PSIP in its ESOP suspense account during the Consolidated Securities Litigation Action class-holding period
and was not a contribution made by the Company to the PSIP or ESOP. Accordingly, there were no accounting
consequences to the Company’s financial statements relating to the receipt of the Unallocated Proceeds by the PSIP.
As a result of the PSIP’s receipt of the Unallocated Proceeds, in 2010 the Company contributed $1 million to
the PSIP. Accordingly, the PSIP expense for 2010 was nominal. In 2011, the Company resumed its contributions to
the PSIP.
PSIP expense by segment for the last three years was as follows:
Years Ended March 31,
(In millions)
2011
2010
2009
Distribution Solutions
$
23
$
—
$
23
Technology Solutions
32
1
28
Corporate
4
—
2
PSIP expense
$
59
$
1
$
53
Cost of sales
$
(1)
17
$
—
$
12
Operating expenses
42
1
41
PSIP expense
$
59
$
1
$
53
(1) Amounts recorded to cost of sales pertain solely to our McKesson Technology Solutions segment.