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McKESSON CORPORATION
FINANCIAL NOTES (Continued)
Non-employee directors receive an annual grant of RSUs, which vest immediately and are expensed upon
grant. The director may elect to receive the underlying shares immediately or defer receipt of the shares if they
meet director stock ownership guidelines. The shares will be automatically deferred for those directors who do
not meet the director stock ownership guidelines. At March 31, 2015, approximately 158,000 RSUs for our
directors are vested.
PeRSUs are RSUs for which the number of RSUs awarded is conditional upon the attainment of one or
more performance objectives over a specified period. Each year, the Compensation Committee approves the
target number of PeRSUs representing the base number of awards that could be granted if performance goals are
attained. PeRSUs are accounted for as variable awards until the performance goals are reached at which time 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 for these awards on a
straight-line basis over the requisite aggregate service period of generally four years.
TSRUs replace PeRSUs for our executive officers beginning in 2015. The number of vested TSRUs is
assessed at the end of a three-year performance period and is conditioned upon attainment of a total shareholder
return metric relative to a peer group of companies. We use the Monte Carlo simulation model to measure the
fair value of TSRUs. TSRUs have a requisite service period of approximately 3 years. For TSRUs that are
designated as equity awards, the fair value is measured at the grant date and expense is attributed to the requisite
service period on a straight-line basis. For TSRUs that are eligible for cash settlement and designated as liability
awards, we measure the fair value at the end of each reporting period and expense is recognized for services
rendered based on the adjusted fair value of the awards. The weighted-average assumptions used to estimate the
fair value of TSRUs included expected dividend yield of 0.5%, risk-free interest rate of 0.7%, expected stock
volatility of 21.3% and contractual term of 3 years.
The following table summarizes restricted stock unit award activity during 2015:
(In millions, except per share data) Shares
Weighted-
Average
Grant Date Fair
Value Per Share
Nonvested, March 31, 2014 4 $ 93.25
Granted 1 187.03
Vested (1) 84.28
Nonvested, March 31, 2015 4 $129.57
The following table provides data related to restricted stock unit award activity:
Years Ended March 31,
(In millions) 2015 2014 2013
Total fair value of shares vested $126 $184 $ 66
Total compensation cost, net of estimated forfeitures, related to nonvested restricted stock
unit awards not yet recognized, pre-tax $206 $236 $210
Weighted-average period in years over which restricted stock unit award cost is expected
to be recognized 2 2 2
85