McKesson 2015 Annual Report Download - page 59

McKESSON CORPORATION
FINANCIAL REVIEW (Continued)
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.
government securities, 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. 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.
Our cash and equivalents balance as of March 31, 2015 included approximately $2.3 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 decreased at March 31, 2015 compared to March 31, 2014 primarily due to
increases in drafts and accounts payable, partially offset by increases in receivables and inventories. 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 and inventories partially offset by increases in current portion of
long-term debt associated with our acquisition of Celesio.
Our ratio of net debt to net capital employed decreased at March 31, 2015 compared to March 31, 2014
primarily due to a decrease in total debt, partially offset by the decrease in total McKesson stockholders’ equity.
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.
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 $0.96 per share in 2015, $0.92 per
share in 2014 and $0.80 per share in 2013. 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 2015, 2014 and 2013, we paid total cash dividends of $227 million, $214 million and $194 million.
Additionally, as required under the Domination Agreement, we are obligated to pay an annual recurring
compensation amount of €0.83 per Celesio share (effective January 1, 2015) to the noncontrolling shareholders
of Celesio.
54