McKesson 2013 Annual Report Download - page 52

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46
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
substantial investment in working capital that is susceptible to large variations during the year as a result of inventory
purchase patterns and seasonal demands. Inventory purchase activity is a function of sales activity and other requirements.
Consolidated working capital decreased at March 31, 2013 compared to March 31, 2012 primarily due to decrease in
cash and cash equivalents balance. Consolidated working capital decreased at March 31, 2012 compared to March 31, 2011,
primarily due to increases in drafts and accounts payable and other accrued liabilities, partially offset by increases in
receivables and inventories.
Our ratio of net debt to net capital employed increased at March 31, 2013 compared to March 31, 2012 primarily due to
lower cash and cash equivalents balance. Our ratio of net debt to net capital employed increased at March 31, 2012 compared
to March 31, 2011 primarily due to a lower cash and cash equivalents balance.
In April 2011, the quarterly dividend was raised from $0.18 to $0.20 per common share for dividends declared after such
date, until further action by the Board. Dividends were $0.80 per share in 2013 and 2012, and $0.72 per share in 2011. The
Company anticipates that it will continue to pay quarterly cash dividends in the future. However, the payment and amount of
future dividends remain within the discretion of the Board and will depend upon the Company's future earnings, financial
condition, capital requirements and other factors. In 2013, 2012 and 2011, we paid total cash dividends of $194 million, $195
million and $171 million.
Contractual Obligations:
The table below presents our significant financial obligations and commitments at March 31, 2013:
Years
(In millions) Total Within 1 Over 1 to 3 Over 3 to 5 After 5
On balance sheet
Long-term debt (1) $ 4,873 $ 352 $ 1,101 $ 1,001 $ 2,419
Other (2) 465 27 203 79 156
Off balance sheet
Interest on borrowings (3) 1,841 200 353 280 1,008
Purchase obligations (4) 473 423 50
—
—
Operating lease obligations (5) 851 213 283 153 202
Other (6) 280 153 78 1 48
Total $ 8,783 $ 1,368 $ 2,068 $ 1,514 $ 3,833
(1) Represents maturities of the Company's long-term obligations including an immaterial amount of capital lease obligations.
(2) Represents our estimated benefit payments, including assumed executive lump sum payments, for the unfunded benefit plans and minimum
funding requirements for the pension plans. Actual lump sum payments could significantly differ from the estimated amounts depending on
the timing of executive retirements and the lump sum interest rate in effect upon retirement.
(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 minimum rental payments for operating leases.
(6) Includes agreements with certain of our Canadian customers' financial institutions under which we have guaranteed the repurchase of our
customers' inventory of $155 million and our customers' debt of $53 million in the event these customers are unable to meet their obligations
to those financial institutions.
At March 31, 2013, the liability recorded for uncertain tax positions, excluding associated interest and penalties, was
approximately $453 million. 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, 2013, our banks and insurance companies have issued $98 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.