McKesson 2014 Annual Report Download - page 91

McKESSON CORPORATION
FINANCIAL NOTES (Continued)
88
Accounts Receivable Sales Facility
We have an Accounts Receivable Sales facility (the “Facility”) with a committed balance of $1.35 billion, although from
time-to-time, the available amount of the Facility may be less than $1.35 billion based on accounts receivable concentration limits
and other eligibility requirements. Prior to the Celesio acquisition, we amended the Facility to extend the term for an additional
year, increased the maximum debt to capital ratio from 56.5% to 65% and added an extended cure period with respect to defaults
under the facility relating to Celesio. The Facility will expire in November 2014 and we anticipate renewing the Facility before
its expiration.
In 2014, 2013 and 2012, we borrowed $550 million $1,325 million and $400 million under the Facility and we repaid
$550 million, $1,725 million and nil. At March 31, 2014 and March 31, 2013, there were no secured borrowings and related
securitized accounts receivable outstanding under the Facility.
The Facility contains requirements relating to the performance of the accounts receivable and covenants relating to the
Company. If we do not comply with these covenants, our ability to use the Facility may be suspended and repayment of any
outstanding balances under the Facility may be required. At March 31, 2014 and March 31, 2013, we were in compliance with
all covenants.
Revolving Credit Facility
We have a syndicated $1.3 billion five-year senior unsecured revolving credit facility, which expires in September 2016. Prior
to the Celesio acquisition, we amended this facility to increase the maximum debt to capital ratio from 56.5% to 65%, and added
an extended cure period with respect to defaults under the credit facility relating to Celesio. Borrowings under this renewed credit
facility bear interest based upon either the London Interbank Offered Rate or a prime rate. There were no borrowings under this
credit facility during 2014, 2013 and 2012. As of March 31, 2014 and 2013, there were no borrowings outstanding under this
credit facility.
Commercial Paper
There were no commercial paper issuances during 2014, 2013 and 2012 and no amounts outstanding at March 31, 2014 and
2013.
Debt Covenants
Our various borrowing facilities and long-term debt are subject to certain covenants. Our principal debt covenant is our U. S.
dollar denominated debt to capital ratio under our $1.3 billion unsecured revolving credit facility, which cannot exceed 65%. For
the purpose of calculating this ratio, borrowings under the $1.35 billion Accounts Receivable Sales facility are excluded. If we
exceed this ratio, repayment of debt outstanding under the revolving credit facility could be accelerated. As of March 31, 2014,
we were in compliance with our financial covenants.
15. Variable Interest Entities
Consolidated Variable Interest Entities
We consolidate VIE’s when we have the power to direct the activities that most significantly impact the entity’s economic
performance, as well as the obligation to absorb losses or right to receive benefits of the entity, and as a result we are considered
to be the primary beneficiary of these entities. In addition to the consolidation of certain VIEs in our specialty health practices,
as a result of our acquisition of Celesio, we have interests in seven new consolidated VIE’s. These Celesio VIEs are single-lessee
leasing entities in which Celesio as the lessee has the majority of the risk of the leased assets through the minimum lease payments
owed by Celesio to the VIEs. As a result of absorbing this risk, the leases provide Celesio with power over the operations of the
leased properties as well as the obligation to absorb losses or right to receive benefits of the entity. Consolidated VIEs have an
immaterial impact on our consolidated statements of operations and cash flows. Total assets and liabilities included in our
consolidated balance sheet for these VIEs were $160 million and $75 million at March 31, 2014.