McKesson 2015 Annual Report Download - page 61

McKESSON CORPORATION
FINANCIAL REVIEW (Continued)
€22.99 per share, which price is increased annually for interest in the amount of 5 percentage points above a base
rate published by the German Bundesbank semiannually, less any compensation amount or guaranteed dividend
already paid (“Put Amount”). The redemption value is the Put Amount adjusted for exchange rate fluctuations
each period. The ultimate amount and timing of any future cash payments related to the Put Amount are
uncertain. Refer to Financial Notes 2 and 3, “Business Combinations” and “Noncontrolling Interests,” to the
consolidated financial statements appearing in this Annual Report on Form 10-K for additional information.
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. Funds necessary for future debt maturities and our other cash requirements are expected to be met by
existing cash balances, cash flow from operations, existing credit sources and other capital market transactions.
Detailed information regarding our debt and financing activities is included in Financial Note 15, “Debt and
Financing Activities,” to the consolidated financial statements appearing in this Annual Report on Form 10-K.
RELATED PARTY BALANCES AND TRANSACTIONS
Information regarding our related party balances and transactions is included in Financial Note 25, “Related
Party Balances and Transactions,” to the consolidated financial statements appearing in this Annual Report on
Form 10-K.
NEW ACCOUNTING PRONOUNCEMENTS
New accounting pronouncements that we have recently adopted, as well as those that have been recently
issued but not yet adopted by us, are included in Financial Note 1, “Significant Accounting Policies,” to the
consolidated financial statements appearing in this Annual Report on Form 10-K.
Item 7A. Quantitative and Qualitative Disclosures about Market Risk
Interest rate risk: Our long-term debt bears interest predominately at fixed rates, whereas our short-term
borrowings are at variable interest rates. At March 31, 2015, we had $0.7 billion in outstanding debt with
variable interest rates.
Our cash and cash equivalents balances earn interest at variable rates. At March 31, 2015, we had $5.3
billion in cash and cash equivalents. The effect of a hypothetical 50 bp increase in the underlying interest rate on
our cash and cash equivalents, net of short-term borrowings and variable rate debt, would have resulted in a
favorable impact to earnings in 2015 and 2014 of approximately $19 million and $12 million.
Foreign exchange risk: The majority of our operations are conducted in U. S. dollars; however, certain
assets and liabilities, revenues and expense and purchasing activities are incurred in and exposed to other
currencies. We seek to manage our foreign exchange risk in part through operational means, including managing
same currency revenues in relation to same currency costs, and same currency assets in relation to same currency
liabilities. Foreign exchange risk is also managed through the use of foreign currency forward-exchange
contracts. These contracts are used to offset the potential earnings effects from mostly intercompany foreign
currency loans. These contracts reduce but do not entirely eliminate foreign currency rate risk.
As of March 31, 2015 and 2014, the effect of a hypothetical adverse 10% change in the underlying foreign
currency exchange rates would have impacted the fair value of our foreign exchange contracts by approximately
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