McKesson 2014 Annual Report Download - page 50

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McKESSON CORPORATION
FINANCIAL REVIEW (Continued)
47
Selected Measures of Liquidity and Capital Resources:
March 31,
(Dollars in millions) 2014 2013 2012
Cash and cash equivalents $ 4,193 $ 2,456 $ 3,149
Working capital 3,072 1,813 1,917
Debt, net of cash and cash equivalents 6,526 2,417 831
Debt to capital ratio (1) 55.7 % 40.8 % 36.8 %
Net debt to net capital employed (2) 43.4 25.5 10.8
Return on McKesson stockholders’ equity (3) 16.2 18.3 19.7
(1) Ratio is computed as total debt divided by the sum of total debt and McKesson stockholders’ equity, excluding noncontrolling interests.
(2) Ratio is computed as total debt, net of cash and cash equivalents (“net debt”), divided by the sum of net debt and McKesson stockholders’ equity, excluding
noncontrolling interests (“net capital employed”).
(3) Ratio is computed as net income attributable to McKesson Corporation for the last four quarters, divided by a five-quarter average of McKesson stockholders’
equity, excluding noncontrolling interests.
Cash equivalents, which are available-for-sale, are carried at fair value. Cash equivalents are primarily invested in AAA rated
prime and U.S. government money market funds denominated in U.S. dollars, AAA rated prime money market funds denominated
in Euros, overnight repurchase agreements collateralized by U.S. Treasury bonds, Canadian government securities and/or securities
that are guaranteed or sponsored by the U.S. government and an AAA rated prime money market fund denominated in British
pound sterling.
The remaining cash and cash equivalents are deposited with several financial institutions. Deposits at U.S. banks exceed the
amount insured by the Federal Deposit Insurance Corporation. We mitigate the risk of our short-term investment portfolio by
depositing funds with reputable financial institutions and monitoring risk profiles and investment strategies of money market funds.
Within the Celesio operations, the majority of deposits are placed in Germany with only banks that are part of deposit protection
programs.
Our cash and equivalents balance as of March 31, 2014 included approximately $2.4 billion of cash held by our subsidiaries
outside of the United States. Our primary intent is to utilize this cash in foreign operations as well as to fund certain research and
development activities for an indefinite period of time. Although the vast majority of cash held outside the United States is available
for repatriation, doing so could subject us to U.S. federal, state and local income tax.
Working capital primarily includes cash and cash equivalents, receivables and inventories net of drafts and accounts payable,
short-term borrowings, current portion of long-term debt, 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 increased at March 31, 2014 compared to March 31, 2013 primarily due to increases in cash
and cash equivalents, and increases in receivables, inventories and current portion of long-term debt associated with our acquisition
of Celesio. Consolidated working capital decreased at March 31, 2013 compared to March 31, 2012, primarily due to a decrease
in the cash and cash equivalents balance.
Our ratio of net debt to net capital employed increased at March 31, 2014 compared to March 31, 2013 primarily due to the
increase in debt associated with our Celesio acquisition. Our ratio of net debt to net capital employed increased at March 31, 2013
compared to March 31, 2012 primarily due to a lower cash and cash equivalents balance.
In July 2013, the quarterly dividend was raised from $0.20 to $0.24 per common share for dividends declared after such date,
until further action by the Board. Dividends were $0.92 per share in 2014 and $0.80 per share in 2013 and 2012. 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 2014, 2013 and 2012, we paid total cash dividends of $214 million, $194 million and $195
million.