McKesson 2015 Annual Report Download - page 101

McKESSON CORPORATION
FINANCIAL NOTES (Continued)
interest payable monthly. During 2015, we borrowed $225 million and repaid $267 million under these credit
lines primarily related to short-term borrowings. Borrowings and repayments during 2014 were not material. As
of March 31, 2015 and 2014, there were $29 million and $65 million outstanding under these credit lines.
Commercial Paper: There were no commercial paper issuances during 2015, 2014 and 2013 and no
amounts outstanding at March 31, 2015 and 2014.
Debt Covenants: Our various borrowing facilities and long-term debt are subject to certain covenants. Our
principal debt covenant is our 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, 2015, we were in compliance with our financial
covenants.
16. Variable Interest Entities
We evaluate our ownership, contractual and other interests in entities to determine if they are variable
interest entities (“VIEs”), if we have a variable interest in those entities and the nature and extent of those
interests. These evaluations are highly complex and involve judgment and the use of estimates and assumptions
based on available historical information and management’s judgment, among other factors. Based on our
evaluations, if we determine we are the primary beneficiary of such VIEs, we consolidate such entities into our
financial statements.
Consolidated Variable Interest Entities
We consolidate VIEs when we have the power to direct the activities that most significantly impact the
VIE’s economic performance and the obligation to absorb losses or the right to receive benefits of the VIE and,
as a result, are considered the primary beneficiary of the VIE. We consolidate certain single-lessee leasing
entities where we, as the lessee, have the majority risk of the leased assets due to our minimum lease payment
obligations to these leasing entities. As a result of absorbing this risk, the leases provide us with the power to
direct the operations of the leased properties and the obligation to absorb losses or the 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 $144 million
and $51 million at March 31, 2015 and $160 million and $75 million at March 31, 2014.
Investments in Unconsolidated Variable Interest Entities
We are involved with VIEs which we do not consolidate because we do not have the power to direct the
activities that most significantly impact their economic performance and thus are not considered the primary
beneficiary of the entities. Our relationships include equity investments and lending, leasing, contractual or other
relationships with the VIEs. Our most significant relationships are with oncology and other specialty practices.
Under these practice arrangements, we generally own or lease all of the real estate and equipment used by the
affiliated practices and manage the practices’ administrative functions. We also have relationships with certain
pharmacies in Europe with whom we may provide financing, have equity ownership and/or a supply agreement
whereby we supply the vast majority of the pharmacies’ purchases. Our maximum exposure to loss (regardless of
probability) as a result of all unconsolidated VIEs was $1.2 billion at March 31, 2015 and 2014, which primarily
represents the value of intangible assets related to service agreements and lease and loan receivables. These
amounts exclude the customer loan guarantees discussed in Financial Note 22, “Financial Guarantees and
Warranties.” We believe that there is no material loss exposure on these assets or from these relationships.
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