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McKESSON CORPORATION
FINANCIAL NOTES (Continued)
78
RSUs and PeRSUs
RSUs, which entitle the holder to receive at the end of a vesting term a specified number of shares of the Company’s common
stock, are accounted for at fair value at the date of grant. 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 vest in three to four
years. We recognize expense for RSUs on a straight-line basis over the requisite service period.
Non-employee directors receive an annual grant of RSUs, which vest immediately and are expensed upon grant. The director
may choose to receive payment immediately or defer receipt of the underlying shares if they meet director stock ownership
guidelines. At March 31, 2014, 150,000 RSUs for our directors are vested.
PeRSUs are RSUs for which the number of RSUs awarded may be conditional upon the attainment of one or more performance
objectives over a specified period. PeRSUs are accounted for as variable awards until the performance goals are reached and the
grant date is established. Total compensation expense for PeRSUs is determined by the product of the number of shares eligible
to be awarded and expected to vest, and the market price of the Company’s common stock, commencing at the inception of the
requisite service period. During the performance period, the compensation expense for PeRSUs is re-computed using the market
price and the performance modifier at the end of a reporting period. At the end of the performance period, if the goals are attained,
the awards are granted and classified as RSUs and accounted for on that basis. We recognize compensation expense of these
awards on a straight-line basis over the requisite aggregate service period of generally four years.
The following table summarizes RSU activity during 2014:
(In millions, except per share data) Shares
Weighted-
Average
Grant Date Fair
Value Per Share
Nonvested, March 31, 2013 6 $ 76.20
Granted 1 120.63
Vested (3) 67.32
Nonvested, March 31, 2014 4 $ 93.25
The following table provides data related to RSU activity:
Years Ended March 31,
(In millions) 2014 2013 2012
Total fair value of shares vested $ 184 $ 66 $ 44
Total compensation cost, net of estimated forfeitures, related to
nonvested RSU awards not yet recognized, pre-tax $ 115 $ 128 $ 143
Weighted-average period in years over which RSU cost is expected
to be recognized 223
In May 2013, 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 “2014 PeRSU”). These
target share units are not included in the table above as they have not been granted in the form of RSUs. As of March 31, 2014,
the total pre-tax compensation expense, net of estimated forfeitures, related to nonvested 2014 PeRSUs not yet recognized was
approximately $121 million, (based on the period-end market price of the Company’s common stock) and the weighted-average
period over which the cost is expected to be recognized is three years.