McKesson 2014 Annual Report Download - page 51

McKESSON CORPORATION
FINANCIAL REVIEW (Continued)
48
Contractual Obligations:
The table below presents our significant financial obligations and commitments at March 31, 2014:
Years
(In millions) Total Within 1 Over 1 to 3 Over 3 to 5 After 5
On balance sheet
Long-term debt (1) $ 10,373 $ 1,424 $ 2,812 $ 2,005 $ 4,132
Other (2) 638 75 216 132 215
Off balance sheet
Interest on borrowings (3) 3,572 357 667 470 2,078
Purchase obligations (4) 2,920 2,901 19 — —
Operating lease obligations (5) 2,070 358 545 361 806
Other (6) 488 177 64 58 189
Total $ 20,061 $ 5,292 $ 4,323 $ 3,026 $ 7,420
(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 under which we have guaranteed the repurchase of our customers’ inventory and our customers’ debt in the event these customers are
unable to meet their obligations to those financial institutions.
At March 31, 2014, the liability recorded for uncertain tax positions, excluding associated interest and penalties, was
approximately $489 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, 2014, our banks and insurance companies have issued $161 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.
Credit Resources:
We fund our working capital requirements primarily with cash and cash equivalents, as well as short-term borrowings under
the accounts receivable sales facilities, revolving credit facilities and from commercial paper issuances.
Senior Bridge Term Loan Facilities
In connection with our acquisition of Celesio, in January 2014, we entered into a $5.5 billion unsecured Senior Bridge
Term Loan Agreement (the “2014 Bridge Loan”) under terms substantially similar to those in our existing revolving credit facility.
On February 4, 2014, we borrowed $4,957 million under this facility, with such proceeds and cash on hand used to fund the
acquisition of Celesio. On March 10, 2014, we repaid $4,076 million of the 2014 Bridge Loan borrowings with funds obtained
from the issuance of long-term debt. On March 11, 2014, we repaid the remaining balance of the 2014 Bridge Loan borrowings
using funds drawn on our Accounts Receivable Sales facility and cash on hand. On April 30, 2014, the commitments under the
2014 Bridge Loan automatically terminated upon the settlement of the tender offers for the remaining common shares of Celesio.
During the time it was outstanding, the 2014 Bridge Loan borrowings bore interest at 1.39% per annum, based on the London
Interbank Offered Rate plus a margin based on the Company’s credit rating. Interest expense for 2014 includes a total of $46
million of fees related to the 2014 Bridge Loan and a bridge loan agreement entered into during the third quarter of 2014 in
anticipation of an earlier acquisition of Celesio.