McKesson 2013 Annual Report Download

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Delivering
Better Health
for 180 Years
Annual Report
Fiscal Year Ended
March 31, 2013
180
years
Innovating
for Better Health
Annual Report
Fiscal Year Ended
March 31, 2013

Table of contents

  • Page 1
    Delivering Innovating Better Health for Better Health Annual180 Report Years for Fiscal Year Ended March 31, 2013 Annual Report Fiscal Year Ended March 31, 2013 180 years

  • Page 2
    ... Canada ‡ Medical-surgical distribution to alternate care sites ‡ Generics pharmaceutical distribution ‡ Medical-management software and services to payers ‡ Business and clinical services for providers ‡ Connectivity services More than 200,000 physicians use our technology and services...

  • Page 3
    ... took a number of strategic and operational actions to position McKesson for the future. In the fourth quarter, we announced our intention to exit our International Technology and Hospital Automation businesses, and to sell our minority stake in Nadro, S.A. de C.V., a privately held pharmaceutical...

  • Page 4
    ... 1800s Early Pioneers 1833 John McKesson and Charles Olcott open a botanical drug import and wholesale shop in New York City. Tall-masted clipper ships docked nearby carry the products all over the world. 1830s The company distributes pharmaceutical products by covered wagon to 17 states...

  • Page 5
    ... Wholesaler. McKesson makes several acquisitions, including PSS World Medical, extending its leadership in pharmaceutical and medical-surgical distribution and bringing additional population health management, capacity management, and provider services into its portfolio. 2013 The company's Health...

  • Page 6
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  • Page 7
    ... Post Street, San Francisco, California 94104 (Address of principal executive offices) (Zip Code) (415) 983-8300 (Registrant's telephone number, including area code) Securities registered pursuant to Section 12(b) of the Act: (Title of each class) Common stock, $0.01 par value (Name of each exchange...

  • Page 8
    ... About Market Risk Financial Statements and Supplementary Data Changes in and Disagreements with Accountants on Accounting and Financial Disclosure Controls and Procedures Other Information PART III 10. 11. 12. 13. 14. Directors, Executive Officers and Corporate Governance Executive Compensation...

  • Page 9
    .... The McKesson Technology Solutions segment delivers enterprise-wide clinical, patient care, financial, supply chain, strategic management software solutions, pharmacy automation for hospitals, as well as connectivity, outsourcing and other services, including remote hosting and managed services, to...

  • Page 10
    ... businesses: U.S. Pharmaceutical Distribution, McKesson Canada, Medical-Surgical Distribution, McKesson Specialty Health and McKesson Pharmacy Systems and Automation. U.S. Pharmaceutical Distribution: This business supplies pharmaceuticals and/or other healthcare-related products to customers...

  • Page 11
    ... resources. McKesson Pharmacy Optimization® develops customized and quantifiable solutions that help hospitals create and sustain financial, operational and clinical results. Fulfill-RxSM - Ordering and inventory management system that integrates McKesson pharmaceutical distribution services...

  • Page 12
    ... of software, automation, support and services to help healthcare organizations improve quality and patient safety, reduce the cost and variability of care and better manage their resources and revenue stream. This segment also includes our InterQual® clinical criteria solution, claims payment...

  • Page 13
    ... following businesses: McKesson Health Solutions, Enterprise Medical Imaging and Ancillary Solutions, RelayHealth, Revenue Management Solutions, Enterprise Information Solutions, Hospital Automation and International Technology. McKesson Health Solutions: This suite of services and software products...

  • Page 14
    ... including other software services firms, consulting firms, shared service vendors, certain hospitals and hospital groups, payers, care management organizations, hardware vendors and internet-based companies with technology applicable to the healthcare industry. Competition varies in size from small...

  • Page 15
    ... 10% of total trade accounts receivable. We also have agreements with group purchasing organizations ("GPOs"), each of which functions as a purchasing agent on behalf of member hospitals, pharmacies and other healthcare providers. The accounts receivables balances are with individual members of the...

  • Page 16
    ... Operations: Information as to foreign and domestic operations is included in Financial Notes 1 and 25, "Significant Accounting Policies" and "Segments of Business," to the consolidated financial statements appearing in this Annual Report on Form 10-K. Forward-Looking Statements This Annual Report...

  • Page 17
    ...'s or our pharmaceutical suppliers' pricing, selling, inventory, distribution or supply policies or practices could significantly reduce our revenues and net income. Due to the diverse range of healthcare supply management and healthcare information technology products and services that we offer...

  • Page 18
    ... basis of utilization) of the most recently reported monthly average manufacturer price ("AMP") using a smoothing process. In addition, Medicare, Medicaid and the State Children's Health Insurance Program ("SCHIP") Extension Act of 2007 requires the Centers for Medicare and Medicaid Services ("CMS...

  • Page 19
    ...of operations and location of product development, manufacture, distribution, and sale. As part of these operating, security and licensure standards, we regularly receive requests for information and occasionally subpoenas from government authorities. Although we believe that we are in compliance in...

  • Page 20
    ... groups, and certain federal and state agencies are also developing standards that could become mandatory for systems purchased by these agencies. For example, the HITECH Act requires meaningful use of "certified" healthcare information technology products by healthcare providers in order to receive...

  • Page 21
    ... including other software services firms, consulting firms, shared service vendors, certain hospitals and hospital groups, payers, care management organizations, hardware vendors and internet-based companies with technology applicable to the healthcare industry. Competition varies in size from small...

  • Page 22
    ...and 10% of total trade accounts receivable. As a result, our sales and credit concentration is significant. We also have agreements with group purchasing organizations ("GPOs"), each of which functions as a purchasing agent on behalf of member hospitals, pharmacies and other healthcare providers, as...

  • Page 23
    ... of pharmaceuticals and medical-surgical supplies, the provision of ancillary services, the conduct of our payer businesses (which include care management programs and our nurse advice services) and the provision of products that assist clinical decisionmaking and relate to patient medical histories...

  • Page 24
    ... of operations. Our healthcare technology businesses, the bulk of which resides in our Technology Solutions segment, deliver enterprise-wide and single entity clinical, patient care, financial, supply chain, strategic management software solutions and pharmacy automation to hospitals, physicians...

  • Page 25
    ... our Technology Solutions segment have long sales and implementation cycles, which could range from a few months to two years or more from initial contact with the customer to completion of implementation. How and when to implement, replace, or expand an information system, or modify or add business...

  • Page 26
    ... and systems; the realization of potential operating synergies; the assimilation and retention of the personnel of the acquired companies; accounting, regulatory or compliance issues that could arise, including internal control over financial reporting; challenges in retaining the customers...

  • Page 27
    ... resulting from tighter capital and credit markets or a slowdown in the general economy. As a result, customers may modify, delay or cancel plans to purchase or implement our products or services and suppliers may increase their prices, reduce their output or change their terms of sale. Additionally...

  • Page 28
    ... Vice President, Chief Technology Officer and Chief Information Officer since April 2009; Executive Vice President, Chief Information Officer from July 2005 to April 2009. Service with the Company - 27 years. Executive Vice President, Corporate Strategy and Business Development since August 2012...

  • Page 29
    McKESSON CORPORATION PART II Item 5. Market for the Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities. (a) Market Information: The principal market on which the Company's common stock is traded is the New York Stock Exchange ("NYSE"). The following ...

  • Page 30
    ...2013 - March 31, 2013 Total Total Number of Shares Purchased - 2.7 4.7 7.4 Average Price Paid per Share $ - 103.82 107.69 (1) This table does not include shares tendered to satisfy the exercise price in connection with cashless exercises of employee stock options or shares tendered to satisfy tax...

  • Page 31
    ...compares the cumulative total stockholder return on the Company's common stock for the periods indicated with the Standard & Poor's 500 Index and the Value Line Healthcare Sector Index (composed of 156 companies in the health care industry, including the Company). 2008 McKesson Corporation $ 100.00...

  • Page 32
    ... capital Days sales outstanding for: (1) Customer receivables Inventories Drafts and accounts payable Total assets Total debt, including capital lease obligations Stockholders' equity Property acquisitions Acquisitions, net of cash and cash equivalents acquired Common Share Information Common shares...

  • Page 33
    ...of this Annual Report on Form 10-K for a list of certain risk factors applicable to our business, financial condition and results of operations. We conduct our business through two operating segments: McKesson Distribution Solutions and McKesson Technology Solutions. See Financial Note 25, "Segments...

  • Page 34
    ... receipt of our share of settlements of antitrust class action lawsuits brought against drug manufacturers and a lower proportion of revenues attributed to sales to customers' warehouses. Additionally, gross profit margin was unfavorably impacted in 2012 by $31 million of product alignment charges...

  • Page 35
    ... to customers' warehouses Total U.S. pharmaceutical distribution & services Canada pharmaceutical distribution & services Medical-Surgical distribution & services Total Distribution Solutions Technology Solutions Services Software & software systems Hardware Total Technology Solutions Total Revenues...

  • Page 36
    ... by government-imposed price reduction for generic pharmaceuticals in certain provinces. Medical-Surgical distribution and services revenues increased in 2013 compared to 2012 primarily due to market growth, new customers and our February 22, 2013 acquisition of PSS World Medical, Inc. ("PSS World...

  • Page 37
    ... Profit Margin Distribution Solutions Technology Solutions Total bp - basis points (1) Gross profit for our Distribution Solutions segment for 2013 and 2011 includes receipt of $44 million and $51 million representing our share of settlements of antitrust class action lawsuits brought against drug...

  • Page 38
    McKESSON CORPORATION FINANCIAL REVIEW (Continued) During the third quarter of 2012, we approved a plan to align our hospital clinical and revenue cycle healthcare software products within our Technology Solutions segment. As part of this alignment strategy, we began converging our core clinical and ...

  • Page 39
    ... Total Operating Expenses Distribution Solutions Technology Solutions Corporate Total Total Acquisition-related Amortization $ 2013 $ 2 14 16 146 52 1 199 215 $ $ 2012 1 19 20 120 51 - 171 191 $ $ 2011 - 16 16 70 46 - 116 132 Increases in our amortization expense of acquired intangible assets...

  • Page 40
    ... financial statements appearing in this Annual Report on Form 10-K for further information. Technology Solutions segment's operating expenses and operating expenses as a percentage of revenues increased in 2013 compared to 2012 primarily due to our continued investment in research and development...

  • Page 41
    ... of operations. Technology Solutions segment's operating expenses and operating expenses as a percentage of revenues increased in 2012 compared to 2011 primarily due to our continued investment in research and development activities, a number of small business acquisitions in 2012 and product...

  • Page 42
    ... paid in connection with our acquisition of PSS World Medical. Interest expense increased in 2012 compared to 2011 primarily due to $1.7 billion of long-term debt issued in February 2011 in connection with our acquisition of US Oncology. Refer to our discussion under the caption "Credit Resources...

  • Page 43
    McKESSON CORPORATION FINANCIAL REVIEW (Continued) Income Taxes: Our reported income tax rates were 30.3%, 26.9% and 30.9% in 2013, 2012 and 2011. Fluctuations in our reported income tax rates are primarily due to changes within our business mix, including varying proportions of income attributable ...

  • Page 44
    .... The cash paid at acquisition was funded from cash on hand and the issuance of long-term debt. PSS World Medical markets and distributes medical products and services throughout the United States. The acquisition of PSS World Medical expands our existing Medical-Surgical business. Financial results...

  • Page 45
    ... employed. At this time, we are not aware of any internal process or customer issues that might lead to a significant increase in the foreseeable future in our allowance for doubtful accounts as a percentage of net revenue. At March 31, 2013, trade and notes receivables were $8,853 million...

  • Page 46
    ... have indefinite useful lives. Refer to Financial Note 2, "Business Combinations," to the consolidated financial statements appearing in this Annual Report on Form 10-K for additional information regarding our acquisitions. Goodwill and Intangible Assets: As a result of acquiring businesses, we have...

  • Page 47
    McKESSON CORPORATION FINANCIAL REVIEW (Continued) Impairment testing is conducted at the reporting unit level, which is generally defined as a component - one level below our Distribution Solutions and Technology Solutions operating segments, for which discrete financial information is available and...

  • Page 48
    ...in our effective tax rate as applied to income from continuing operations would have increased/decreased tax expense by approximately $19 million, or $0.08 per diluted share, for 2013. Share-Based Compensation: Our compensation programs include share-based compensation. We account for all sharebased...

  • Page 49
    ... sufficient to fund our longterm and short-term capital expenditures, working capital and other cash requirements. In addition, we may access the longterm debt capital markets from time-to-time. Net cash flow from operating activities was $2,483 million in 2013 compared to $2,950 million in 2012 and...

  • Page 50
    ...with revenue growth, partially offset by improved management of inventories and longer payment terms for certain purchases. Cash flows from operations can be significantly impacted by factors such as the timing of receipts from customers and payments to vendors. Net cash used in investing activities...

  • Page 51
    ..., except per share data) Number of shares repurchased (1) Average price paid per share Total value of shares repurchased (1) (1) Excludes shares surrendered for tax withholding. 2013 $ $ 13 100.82 1,159 $ $ 2012 20 83.47 1,850 $ $ 2011 29 69.62 2,032 The total authorization outstanding for...

  • Page 52
    McKESSON CORPORATION FINANCIAL REVIEW (Continued) Working capital primarily includes cash and cash equivalents, receivables and inventories net of drafts and accounts payable, short-term borrowings, deferred revenue and other current liabilities. Our Distribution Solutions segment requires a ...

  • Page 53
    ... Company's credit rating. Corporate Interest expense for 2011 includes $25 million related to fees incurred on the 2011 Bridge Loan. PSS World Medical Debt Acquired Upon our purchase of PSS World Medical in February 2013, we assumed the outstanding debt of PSS World Medical. Prior to our acquisition...

  • Page 54
    ... and other capital market transactions. Additional information regarding our accounts receivable sales facility is included in Financial Notes 1 and 14, "Significant Accounting Policies" and "Debt and Financing Activities," to the consolidated financial statements appearing in this Annual Report on...

  • Page 55
    ...Financial Note 1, "Significant Accounting Policies," to the consolidated financial statements appearing in this Annual Report on Form 10-K. Item 7A. Quantitative and Qualitative Disclosures about Market Risk Interest rate risk: Our long-term debt bears interest predominately at fixed rates, whereas...

  • Page 56
    ... FINANCIAL INFORMATION Page 51 52 53 54 55 56 57 58 Management's Annual Report on Internal Control Over Financial Reporting Report of Independent Registered Public Accounting Firm Consolidated Financial Statements: Consolidated Statements of Operations for the years ended March 31, 2013, 2012 and...

  • Page 57
    ...REPORTING The management of McKesson Corporation is responsible for establishing and maintaining an adequate system of internal control over financial reporting, as such term is defined in Exchange Act Rules 13a-15(f) and 15d-15(f). With the participation of the Chief Executive Officer and the Chief...

  • Page 58
    ... PUBLIC ACCOUNTING FIRM To the Board of Directors and Stockholders of McKesson Corporation: We have audited the accompanying consolidated balance sheets of McKesson Corporation and subsidiaries (the "Company") as of March 31, 2013 and 2012, and the related consolidated statements of operations...

  • Page 59
    ... CORPORATION CONSOLIDATED STATEMENTS OF OPERATIONS (In millions, except per share amounts) Years Ended March 31, 2013 Revenues Cost of Sales Gross Profit Operating Expenses Selling Distribution Research and development Administrative Litigation charges Gain on business combination Total Operating...

  • Page 60
    McKESSON CORPORATION CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (In millions) Years Ended March 31, 2013 Net Income Other Comprehensive Income (Loss), net of tax Foreign currency translation adjustments, net of income tax expense (benefit) of ($2), $2 and $2 Unrealized losses on cash flow ...

  • Page 61
    ... Intangible Assets, Net Other Assets Total Assets LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities Drafts and accounts payable Short-term borrowings Deferred revenue Deferred tax liabilities Current portion of long-term debt Other accrued liabilities Total Current Liabilities 2012 $ 2,456...

  • Page 62
    McKESSON CORPORATION CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY Years Ended March 31, 2013, 2012 and 2011 (In millions, except per share amounts) Common Stock Shares Balances, March 31, 2010 Issuance of shares under employee plans Share-based compensation Tax benefit related to issuance of ...

  • Page 63
    ... in operating assets and liabilities, net of acquisitions: Receivables Inventories Drafts and accounts payable Deferred revenue Taxes Litigation charges Litigation settlement payments Other Net cash provided by operating activities Investing Activities Property acquisitions Capitalized software...

  • Page 64
    ... Accounting Policies Nature of Operations: McKesson Corporation ("McKesson," the "Company," the "Registrant" or "we" and other similar pronouns) delivers pharmaceuticals, medical supplies and healthcare information technology that make healthcare safer while reducing costs. We conduct our business...

  • Page 65
    ... 10% of total trade accounts receivable. As a result, our sales and credit concentration is significant. We also have agreements with group purchasing organizations ("GPOs"), each of which functions as a purchasing agent on behalf of member hospitals, pharmacies and other healthcare providers. The...

  • Page 66
    ... Solutions and Technology Solutions operating segments, for which discrete financial information is available and segment management regularly reviews the operating results of that unit. Components that have essentially similar operations, products, services, customers and operating margins...

  • Page 67
    ... and services or the amount and timing of reported revenues. Technology Solutions Revenues for our Technology Solutions segment are generated primarily by licensing software and software systems (consisting of software, hardware and maintenance support), and providing claims processing, outsourcing...

  • Page 68
    ... software functionality available on a remote hosting basis from our data centers. The data centers provide system and administrative support, as well as hosting services. Revenue on products sold on an application service provider basis is recognized on a monthly basis over the term of the contract...

  • Page 69
    ... statements of operations or capitalized on the consolidated balance sheets in the same manner as cash compensation paid to our employees. Loss Contingencies: We are subject to various claims, other pending and potential legal actions for damages, investigations relating to governmental laws...

  • Page 70
    ... and low estimate. Business Combinations: We account for acquired businesses using the acquisition method of accounting, which requires that the assets acquired and liabilities assumed be recorded at the date of acquisition at their respective fair values. Any excess of the purchase price over the...

  • Page 71
    .... The cash paid at acquisition was funded from cash on hand and the issuance of long-term debt. PSS World Medical markets and distributes medical products and services throughout the United States. The acquisition of PSS World Medical expands our existing Medical-Surgical business. The following...

  • Page 72
    McKESSON CORPORATION FINANCIAL NOTES (Continued) On April 6, 2012, we purchased the remaining 50% ownership interest in our corporate headquarters building located in San Francisco, California, for $90 million, which was funded from cash on hand. We previously held a 50% ownership interest and were ...

  • Page 73
    ... oncologists, and works with patients, hospitals, payers and the medical industry across all phases of the cancer research and delivery continuum. The acquisition of US Oncology expands our existing specialty pharmaceutical distribution business and adds practice management services for oncologists...

  • Page 74
    ... in 2013 were primarily related to our acquisition of PSS World Medical and our gain on business combination from our acquisition of the remaining 50% ownership interest in our corporate headquarters building. Expenses for 2012 and 2011 were primarily incurred to acquire and integrate US Oncology...

  • Page 75
    ...statement of operations. Fiscal 2012 During the third quarter of 2012, we approved a plan to align our hospital clinical and revenue cycle healthcare software products within our Technology Solutions segment. As part of this alignment strategy, we began converging our core clinical and revenue cycle...

  • Page 76
    ... benefit is computed using the tax rates of applicable tax jurisdictions. Additionally, a portion of pre-tax compensation expense is not tax-deductible. Stock Plans The 2005 Stock Plan provides our employees, officers and non-employee directors share-based long-term incentives. The 2005 Stock Plan...

  • Page 77
    McKESSON CORPORATION FINANCIAL NOTES (Continued) Stock Options Stock options are granted at no less than fair market value, and those options granted under the 2005 Stock Plan generally have a contractual term of seven years and follow a four-year vesting schedule. Compensation expense for stock ...

  • Page 78
    ...Total compensation expense for RSUs under our stock plans is determined by the product of the number of shares that are expected to vest and the grant date market price of the Company's common stock. The Compensation Committee determines the vesting terms at the time of grant. These awards generally...

  • Page 79
    ... 43 131 2 In May 2012, the Compensation Committee approved 1 million PeRSU target share units representing the base number of awards that could be granted, if goals are attained, and would be granted in the first quarter of 2014 (the "2013 PeRSU"). These target share units are not included in the...

  • Page 80
    McKESSON CORPORATION FINANCIAL NOTES (Continued) Employee Stock Purchase Plan ("ESPP") The Company has an ESPP under which 16 million shares have been authorized for issuance. The ESPP allows eligible employees to purchase shares of our common stock through payroll deductions. The deductions occur ...

  • Page 81
    ...Service ("IRS") relating to 2003 through 2006. We disagree with a substantial portion of the tax assessments primarily relating to transfer pricing. We are pursuing administrative relief through the appeals process. We have also received assessments from the Canada Revenue Agency ("CRA") for a total...

  • Page 82
    ... Liabilities Inventory valuation and other assets Fixed assets and systems development costs Intangibles Other Total liabilities Net deferred tax liability Current net deferred tax asset Current net deferred tax liability Long-term deferred tax asset Long-term deferred tax liability Net deferred tax...

  • Page 83
    ... on unrecognized tax benefits amounted to $131 million. 8. Discontinued Operation In July 2010, our Technology Solutions segment sold its wholly-owned subsidiary, McKesson Asia Pacific Pty Limited ("MAP"), a provider of phone and web-based healthcare services in Australia and New Zealand, for...

  • Page 84
    ... common share in 2013, 2012 and 2011, as they were anti-dilutive. 10. Receivables, Net March 31, (In millions) Customer accounts Other Total Allowances Net $ $ 2013 8,683 1,423 10,106 (131) 9,975 $ $ 2012 8,562 1,537 10,099 (122) 9,977 Other receivables primarily include amounts due from suppliers...

  • Page 85
    ... (Years) March 31, 2012 (Dollars in millions) Gross Carrying Amount Accumulated Amortization Net Carrying Amount Gross Carrying Amount Accumulated Amortization Net Carrying Amount Customer lists Service agreements Trademarks and trade names Technology Other Total 8 17 16 4 6 $ $ 1,761...

  • Page 86
    ... Other Total debt Less current portion Total long-term debt $ 2013 $ - 350 499 599 500 499 349 598 400 400 175 493 11 4,873 (352) 4,521 $ $ 2012 500 350 - 598 499 - 349 598 - - 175 493 18 3,580 (508) 3,072 Senior Bridge Term Loan Facility In connection with our acquisition of PSS World Medical, in...

  • Page 87
    ... Company's credit rating. Corporate interest expense for 2011 includes $25 million related to fees incurred on the 2011 Bridge Loan. PSS World Medical Debt Acquired Upon our purchase of PSS World Medical in February 2013, we assumed the outstanding debt of PSS World Medical. Prior to our acquisition...

  • Page 88
    ... parent company, transfers certain U.S. pharmaceutical trade accounts receivable on a non-recourse basis to a special purpose entity ("SPE"), which is a wholly-owned, bankruptcy-remote subsidiary of McKesson Corporation that is consolidated in our financial statements. This SPE then sells undivided...

  • Page 89
    ... billion and $1.1 billion at March 31, 2013 and 2012, 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 21, "Financial Guarantees and Warranties." We...

  • Page 90
    ... return on plan assets Employer and participant contributions Benefits paid Foreign exchange impact and other Fair value of plan assets at end of period Funded status at end of period Amounts recognized on the balance sheet Current liabilities Long-term liabilities Total (1) The benefit obligation...

  • Page 91
    ... and $44 million for 2014 to 2018 and $213 million for 2019 through 2023. Expected benefit payments are based on the same assumptions used to measure the benefit obligations and include estimated future employee service. Expected contributions to be made for our pension plans are $15 million for...

  • Page 92
    ..., and fixed income commingled funds. Other investments include real estate funds, hedge funds, other commingled funds and cash and cash equivalents. We develop our expected long-term rate of return assumption based on the projected performance of the asset classes in which plan assets are invested...

  • Page 93
    McKESSON CORPORATION FINANCIAL NOTES (Continued) March 31, 2013 (In millions) Cash and cash equivalents Equity securities: Common and preferred stock Equity commingled funds Fixed income securities: Government securities Corporate bonds Mortgage-backed securities Asset-backed securities and other ...

  • Page 94
    ... stock - This investment class consists of common and preferred shares issued by U.S. and nonU.S. corporations. Common shares are traded actively on exchanges and price quotes are readily available. Preferred shares may not be actively traded. Holdings of common shares are generally classified...

  • Page 95
    McKESSON CORPORATION FINANCIAL NOTES (Continued) Multiemployer Plans We also contribute to a number of multiemployer pension plans under the terms of collective-bargaining agreements that cover union-represented employees. The risks of participating in these multiemployer plans are different from ...

  • Page 96
    ...were 7.50% and 8.00% for prescription drugs, 7.50%/7.25% and 7.50%/7.50% for ages pre-65/post-65 medical and 5.25% and 5.50% for dental in 2013 and 2012. For 2013, 2012 and 2011, a one-percentage-point increase or decrease in the assumed healthcare cost trend rate would not have a material impact on...

  • Page 97
    ... that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The analysis of fair value is conducted by our accounting and finance personnel who organizationally report to the Chief Financial Officer. There is...

  • Page 98
    ... Note 3, "Asset Impairments and Product Alignment Charges," in 2013 we recorded a goodwill impairment charge of $36 million in one of Technology Solutions segment's reporting units. The impairment charge was primarily the result of a significant decrease in estimated revenues for a software product...

  • Page 99
    ...March 31, 2013, we have a commitment to contribute up to $72 million to a non-consolidated investment for building and equipment construction. Our software license agreements generally include certain provisions for indemnifying customers against liabilities if our software products infringe a third...

  • Page 100
    ... in our estimates used for the percentage-of-completion method of accounting for software installation services within these contracts. In addition, most of our customers who purchase our software and automation products also purchase annual maintenance agreements. Revenues from these maintenance...

  • Page 101
    ... of Louisiana v. McKesson Corporation, (C597634 Sec. 23). On December 21, 2012, and January 18, 2013, the Company entered into separate agreements in settlement of the Louisiana Action and a claim for attorneys' fees and costs by the State of Louisiana's counsel. On April 19, 2013, the court granted...

  • Page 102
    McKESSON CORPORATION FINANCIAL NOTES (Continued) The Arizona Administrative Proceeding On November 5, 2010, the Company received a Notice of Proposed Civil Monetary Penalty from the Office of Inspector General for the Arizona Health Care Cost Containment System ("AHCCCS") purporting to initiate an ...

  • Page 103
    ... v. McKesson Corporation, et al., (12CV3948). On April 8, 2013, the Company entered into a settlement agreement with the State of Wisconsin. On April 23, 2013, the Court entered an order dismissing with prejudice the claims asserted against the Company in the Wisconsin Action. The New Jersey Qui...

  • Page 104
    ... agreement to acquire PSS World Medical, on December 5, 2012, a putative class action complaint was filed in Florida state court, Duval County, by an alleged public shareholder of PSS World Medical against PSS World Medical, members of PSS World Medical's board of directors, The Goldman Sachs Group...

  • Page 105
    ... shared with other PRPs. At one of these sites, the United States Environmental Protection Agency has selected a preferred remedy with an estimated cost of approximately $70 million. It is not certain at this point in time what proportion of this estimated liability will be borne by the Company...

  • Page 106
    ... plans approved: April 2012 January 2013 Shares repurchased Balance, March 31, 2013 Total Number of Shares Purchased (2) (3) Average Price Paid Per Share 29 $ 69.62 $ 20 $ 83.47 $ 13 $ 100.82 $ (1) This table does not include shares tendered to satisfy the exercise price in connection...

  • Page 107
    ... NOTES (Continued) During the fourth quarter of 2013, we retired 1.8 million shares repurchased for $217 million by the Company. The retired shares constitute authorized but unissued shares. We elected to allocate any excess of share repurchase price over par value between additional paid-in capital...

  • Page 108
    ...delivers enterprise-wide clinical, patient care, financial, supply chain, strategic management software solutions, pharmacy automation for hospitals, as well as connectivity, claims processing, outsourcing and other services, including remote hosting and managed services, to healthcare organizations...

  • Page 109
    ... pharmaceutical distribution & services Medical-Surgical distribution & services Total Distribution Solutions Technology Solutions Services Software & software systems Hardware Total Technology Solutions Total Revenues Operating profit Distribution Solutions (2) Technology Solutions Total Corporate...

  • Page 110
    ...as follows: March 31, (In millions) Segment assets Distribution Solutions Technology Solutions Total Corporate Cash and cash equivalents Other Total Property, plant and equipment, net United States International Total 2013 $ 27,307 3,829 31,136 2,456 1,194 $ 34,786 $ $ 2012 25,374 3,575 28,949 3,149...

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    ... may reflect rounding adjustments. 27. Subsequent Event In April 2013, we committed to a plan to sell our International Technology and our Hospital Automation businesses. Financial results for these businesses will be reported as discontinued operations commencing in the first quarter of...

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    ...15. Internal Control over Financial Reporting Management's report on the Company's internal control over financial reporting (as such term is defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) and the related report of our independent registered public accounting firm are included in this Annual...

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    ... "Audit Committee Report" and "Audit Committee Financial Expert" in our Proxy Statement. Information about the Code of Business Conduct and Ethics applicable to all employees, officers and directors can be found on our website, www.mckesson.com, under the caption "Investors - Corporate Governance...

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    ... plan by employees of certain of the Company's international and other subsidiaries. As to those employees, the ESPP does not qualify under Section 423 of the Internal Revenue Code. Currently, 16 million shares have been approved by stockholders for issuance under the ESPP. The ESPP is implemented...

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    McKESSON CORPORATION Item 13. Certain Relationships and Related Transactions and Director Independence. Information with respect to certain transactions with management is incorporated by reference from the Proxy Statement under the heading "Certain Relationships and Related Transactions." ...

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    McKESSON CORPORATION PART IV Item 15. Exhibits and Financial Statement Schedule. Page (a)(1) Consolidated Financial Statements Report of Deloitte & Touche, LLP, Independent Registered Public Accounting Firm Consolidated Statements of Operations for the years ended March 31, 2013, 2012 and 2011 ...

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    ... undersigned, thereunto duly authorized. MCKESSON CORPORATION Date: May 7, 2013 /s/ Jeffrey C. Campbell Jeffrey C. Campbell Executive Vice President and Chief Financial Officer Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following...

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    McKESSON CORPORATION SCHEDULE II SUPPLEMENTARY CONSOLIDATED FINANCIAL STATEMENT SCHEDULE VALUATION AND QUALIFYING ACCOUNTS For the Years Ended March 31, 2013, 2012 and 2011 (In millions) Additions Balance at Beginning of Year Charged to Costs and Expenses Charged to Other Accounts (3) Deductions ...

  • Page 119
    ... 4, 2012, and related Form of 2015 Note and Form of 2022 Note. Officer's Certificate, dated as of March 8, 2013, and related Form of 2018 Note and Form of 2023 Note. McKesson Corporation 1999 Stock Option and Restricted Stock Plan, as amended through May 26, 2004. Form 8-K File Number 1-13252...

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    ... Change in Control Policy for Selected Executive Employees, as amended and restated on October 26, 2010. 10.13* McKesson Corporation 2005 Management Incentive Plan, as amended and restated on April 21, 2010, effective July 28, 2010. 10.14* Form of Statement of Terms and Conditions applicable to...

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    ... the Company and its Executive Vice President and Group President. 10.25* Form of Director and Officer Indemnification Agreement. 12†Computation of Ratio of Earnings to Fixed Charges. 21†List of Subsidiaries of the Registrant. 23†Consent of Independent Registered Public Accounting Firm...

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    ...the Sarbanes-Oxley Act of 2002. 101†The following materials from the McKesson Corporation Annual Report on Form 10-K for the fiscal year ended March 31, 2013, formatted in Extensible Business Reporting Language (XBRL): (i) the Consolidated Statements of Operations, (ii) Consolidated Statements of...

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    ...financial information; and Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. /s/ John H. Hammergren John H. Hammergren Chairman of the Board, President and Chief Executive Officer...

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    ... financial information; and Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. /s/ Jeffrey C. Campbell Jeffrey C. Campbell Executive Vice President and Chief Financial Officer...

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    ... Exchange Act of 1934; and The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. /s/ John H. Hammergren John H. Hammergren Chairman of the Board, President and Chief Executive Officer May 7, 2013...

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    ... Chief Information Officer Brian S. Tyler Executive Vice President, Corporate Strategy and Business Development Nicholas A. Loiacono Vice President and Treasurer Nigel A. Rees Vice President and Controller Willie C. Bogan Secretary Common Stock McKesson Corporation common stock is listed on the New...

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    McKesson Corporation One Post Street San Francisco, CA 94104 www.mckesson.com © 2013 McKesson Corporation. All rights reserved.