Document and Company Informatio
Document and Company Information (USD $) | ||
9 Months Ended
Dec. 31, 2009 | Sep. 30, 2008
| |
Document and Company Information [Abstract] | ||
Entity Registrant Name | MCKESSON CORP | |
Entity Central Index Key | 0000927653 | |
Document Type | 10-Q | |
Document Period End Date | 2009-12-31 | |
Amendment Flag | false | |
Current Fiscal Year End Date | --03-31 | |
Entity Well-known Seasoned Issuer | Yes | |
Entity Voluntary Filers | No | |
Entity Current Reporting Status | Yes | |
Entity Filer Category | Large Accelerated Filer | |
Entity Public Float | $14,553,849,341 | |
Entity Common Stock, Shares Outstanding (actual number of shares) | 269,392,477 |
Condensed Consolidated Statemen
Condensed Consolidated Statements of Operations (Unaudited) (USD $) | ||||
In Millions, except Per Share data | 3 Months Ended
Dec. 31, 2009 | 3 Months Ended
Dec. 31, 2008 | 9 Months Ended
Dec. 31, 2009 | 9 Months Ended
Dec. 31, 2008 |
Revenues | $28,272 | $27,130 | $82,059 | $80,408 |
Cost of Sales | 26,817 | 25,787 | 77,966 | 76,495 |
Gross Profit | 1,455 | 1,343 | 4,093 | 3,913 |
Operating Expenses | 946 | 904 | 2,678 | 2,722 |
Litigation Charge (Credit) | 0 | 493 | (20) | 493 |
Total Operating Expenses | 946 | 1,397 | 2,658 | 3,215 |
Operating Income (Loss) | 509 | (54) | 1,435 | 698 |
Other Income, Net | 25 | 17 | 39 | 71 |
Interest Expense | (47) | (33) | (142) | (102) |
Income (Loss) Before Income Taxes | 487 | (70) | 1,332 | 667 |
Income Tax (Expense) Benefit | (161) | 50 | (417) | (125) |
Net Income (Loss) | $326 | ($20) | $915 | $542 |
Earnings (Loss) Per Common Share | ||||
Diluted | 1.19 | -0.07 | 3.36 | 1.94 |
Basic | 1.21 | -0.07 | 3.41 | 1.97 |
Dividends Declared Per Common Share | 0.12 | 0.12 | 0.36 | 0.36 |
Weighted Average Shares | ||||
Diluted | 274 | 274 | 272 | 279 |
Basic | 269 | 274 | 269 | 275 |
Condensed Consolidated Balance
Condensed Consolidated Balance Sheets (Unaudited) (USD $) | ||
In Millions | Dec. 31, 2009
| Mar. 31, 2009
|
Current Assets | ||
Cash and cash equivalents | $3,428 | $2,109 |
Receivables, net | 8,319 | 7,774 |
Inventories, net | 8,842 | 8,527 |
Prepaid expenses and other | 265 | 261 |
Total | 20,854 | 18,671 |
Property, Plant and Equipment, Net | 835 | 796 |
Capitalized Software Held for Sale, Net | 236 | 221 |
Goodwill | 3,559 | 3,528 |
Intangible Assets, Net | 580 | 661 |
Other Assets | 1,475 | 1,390 |
Total Assets | 27,539 | 25,267 |
Current Liabilities | ||
Drafts and accounts payable | 13,021 | 11,739 |
Deferred revenue | 1,250 | 1,145 |
Current portion of long-term debt | 217 | 219 |
Other accrued liabilities | 2,430 | 2,503 |
Total | 16,918 | 15,606 |
Long-Term Debt | 2,294 | 2,290 |
Other Noncurrent Liabilities | 1,204 | 1,178 |
Stockholders' Equity | ||
Preferred stock, $0.01 par value, 100 shares authorized, no shares issued or outstanding | 0 | 0 |
Common stock, $0.01 par value Shares authorized: December 31, 2009 and March 31, 2009 - 800 Shares issued: December 31, 2009 - 357 and March 31, 2009 - 351 | 4 | 4 |
Additional Paid-in Capital | 4,644 | 4,417 |
Retained Earnings | 6,921 | 6,103 |
Accumulated Other Comprehensive Income (Loss) | 23 | (179) |
Other | (12) | (8) |
Treasury Shares, at Cost, December 31, 2009 - 88 and March 31, 2009 - 80 | (4,457) | (4,144) |
Total Stockholders' Equity | 7,123 | 6,193 |
Total Liabilities and Stockholders' Equity | $27,539 | $25,267 |
1_Condensed Consolidated Balanc
Condensed Consolidated Balance Sheets (Unaudited) (Parenthetical) (USD $) | ||
Share data in Millions | Dec. 31, 2009
| Mar. 31, 2009
|
Stockholders' Equity | ||
Preferred stock, par value | 0.01 | 0.01 |
Preferred stock, shares authorized | 100 | 100 |
Preferred stock, shares issued | 0 | 0 |
Preferred stock, shares outstanding | 0 | 0 |
Common stock, par value | 0.01 | 0.01 |
Common stock, shares authorized | 800 | 800 |
Common stock, shares issued | 357 | 351 |
Treasury shares | 88 | 80 |
2_Condensed Consolidated Statem
Condensed Consolidated Statements of Cash Flows (Unaudited) (USD $) | ||
In Millions | 9 Months Ended
Dec. 31, 2009 | 9 Months Ended
Dec. 31, 2008 |
Operating Activities | ||
Net Income | $915 | $542 |
Adjustments to reconcile to net cash provided by operating activities: | ||
Depreciation and amortization | 350 | 330 |
Other deferred taxes | 73 | 76 |
Income tax reserve reversals | 0 | (65) |
Share-based compensation expense | 83 | 72 |
Other non-cash items | (7) | (7) |
Changes in operating assets and liabilities, net of business acquisitions: | ||
Receivables | (415) | (881) |
Impact of accounts receivable sales facility | 0 | 350 |
Inventories | (205) | (490) |
Drafts and accounts payable | 1,131 | 384 |
Deferred revenue | 57 | 88 |
Taxes | 95 | 107 |
Litigation charge (credit) | (20) | 493 |
Deferred tax (benefit) expense on litigation charge (credit) | 116 | (182) |
Litigation settlement payments | (350) | 0 |
Other | (98) | (83) |
Net cash provided by operating activities | 1,725 | 734 |
Investing Activities | ||
Property acquisitions | (137) | (151) |
Capitalized software expenditures | (134) | (137) |
Acquisitions of businesses, less cash and cash equivalents acquired | (18) | (320) |
Restricted cash for litigation charge | 55 | 0 |
Other | 31 | 76 |
Net cash used in investing activities | (203) | (532) |
Financing Activities | ||
Proceeds from short-term borrowings | 5 | 3,602 |
Repayments of short-term borrowings | (6) | (3,602) |
Common stock transactions - issuances | 159 | 77 |
Common stock share repurchases, including shares surrendered for tax withholding | (322) | (147) |
Common stock share repurchases, retirements | 0 | (204) |
Common stock transactions - other | 26 | 10 |
Dividends paid | (98) | (83) |
Other | (1) | (2) |
Net cash used in financing activities | (237) | (349) |
Effect of exchange rate changes on cash and cash equivalents | 34 | (40) |
Net increase (decrease) in cash and cash equivalents | 1,319 | (187) |
Cash and cash equivalents at beginning of period | 2,109 | 1,362 |
Cash and cash equivalents at end of period | $3,428 | $1,175 |
Significant Accounting Policies
Significant Accounting Policies | |
9 Months Ended
Dec. 31, 2009 USD / shares | |
Significant Accounting Policies [Abstract] | |
Significant Accounting Policies | 1.Significant Accounting Policies Basis of Presentation The condensed consolidated financial statements of McKesson Corporation (McKesson, the Company, or we and other similar pronouns) include the financial statements of all wholly-owned subsidiaries, majority-owned or controlled companies and certain immaterial variable interest entities (VIEs) of which the Company is the primary beneficiary. Intercompany transactions and balances have been eliminated. The condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (GAAP) for interim financial reporting and the rules and regulations of the U.S. Securities and Exchange Commission (SEC). Accordingly, certain information and footnote disclosures normally included in the annual consolidated financial statements prepared in accordance with GAAP have been condensed. In accordance with the applicable sections of Accounting Standards Codification (ASC or Codification) 810, Consolidation, the Company evaluates its ownership, contractual and other interests in entities to determine if they are VIEs, if it has 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 managements estimates, among other factors. To prepare the financial statements in conformity with GAAP, management must make estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of these financial statements and income and expenses during the reporting period. Actual amounts may differ from these estimated amounts. In our opinion, these unaudited condensed consolidated financial statements include all adjustments necessary for a fair presentation of the Companys financial position as of December31, 2009, the results of operations for the quarters and nine months ended December31, 2009 and 2008 and cash flows for the nine months ended December31, 2009 and 2008. The results of operations for the quarter and nine months ended December31, 2009 are not necessarily indicative of the results that may be expected for the entire year. These interim financial statements should be read in conjunction with the annual audited financial statements, accounting policies and financial notes included in our Annual Report on Form 10-K for the fiscal year ended March31, 2009 (2009 Annual Report) previously filed with the SEC on May5, 2009. Certain prior period amounts have been reclassified to conform to the current period presentation. The Companys fiscal year begins on April 1 and ends on March31. Unless otherwise noted, all references to a particular year shall mean the Companys fiscal year. The Company evaluated all subsequent events that occurred after the balance sheet date through the date and time our financial statements were issued on January 26, 2010. Significant Accounting Policies Update The Company has disclosed its significant accounting policies in Financial Note 1, Significant Accounting Policies, inclu |
Business Acquisitions
Business Acquisitions | |
9 Months Ended
Dec. 31, 2009 USD / shares | |
Business Acquisitions [Abstract] | |
Business Acquisitions | 2.Business Acquisitions During the first quarter of 2009, we acquired McQueary Brothers Drug Company (McQueary Brothers) of Springfield, Missouri for approximately $190million. McQueary Brothers is a regional distributor of pharmaceutical, health and beauty products to independent and regional chain pharmacies in the Midwestern U.S. This acquisition expanded our existing U.S. pharmaceutical distribution business. The acquisition was funded with cash on hand. Approximately $126million of the purchase price allocation was assigned to goodwill, which primarily reflects the expected future benefits from synergies to be realized upon integrating the business. During the first quarter of 2010, the acquisition accounting was completed. Financial results for McQueary Brothers have been included within our Distribution Solutions segment since the date of acquisition. During the last two years, we also completed a number of other smaller acquisitions within both of our operating segments. Financial results for our business acquisitions have been included in our consolidated financial statements since their respective acquisition dates. Purchase prices for our business acquisitions have been allocated based on estimated fair values at the date of acquisition. Goodwill recognized for our business acquisitions is generally not expected to be deductible for tax purposes. Pro forma results of operations for our business acquisitions have not been presented because the effects were not material to the consolidated financial statements on either an individual or an aggregate basis. |
Gain on Sale of Equity Investme
Gain on Sale of Equity Investments | |
9 Months Ended
Dec. 31, 2009 USD / shares | |
Gain on Sale of Equity Investments [Abstract] | |
Gain on Sale of Equity Investments | 3.Gain on Sale of Equity Investments In October2009, our Distribution Solutions segment sold its 50% equity interest in McKesson Logistics Solutions L.L.C. (MLS), a Canadian logistics company, for a pre-tax gain of approximately $17million or $14million after income taxes. The pre-tax gain is included in other income, net on our condensed consolidated statements of operations. In July2008, our Distribution Solutions segment sold its 42% equity interest in Verispan, L.L.C. (Verispan), a data analytics company, for a pre-tax gain of approximately $24million or $14million after income taxes. The pre-tax gain is included in other income, net on our condensed consolidated statements of operations. |
Share-Based Payments
Share-Based Payments | |
9 Months Ended
Dec. 31, 2009 USD / shares | |
Share-Based Payments [Abstract] | |
Share-Based Payments | 4.Share-Based Payments We provide share-based compensation for our employees, officers and non-employee directors, including stock options, an employee stock purchase plan, restricted stock units (RSUs) and performance-based restricted stock units (PeRSUs) (collectively, share-based awards). Most of the Companys share-based awards are granted in the first quarter of each fiscal year. Compensation expense for employee stock options is recognized on a straight-line basis over the requisite service period and is based on the grant-date fair value for the portion of the awards that is ultimately expected to vest. We have elected to expense the fair value of RSUs with only graded vesting and service conditions on a straight-line basis over the requisite service period. PeRSUs are RSUs for which the number of RSUs awarded may be conditional upon the attainment of one or more performance objectives over a specified period. PeRSUs are accounted for as variable awards until the performance goals are reached and the grant date is established. The fair value of PeRSUs is determined by the product of the number of shares eligible to be awarded and the market price of the Companys common stock, commencing at the inception of the requisite service period. During the performance period, the PeRSUs are re-valued 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. For PeRSUs granted prior to 2009 with multiple vest dates, we recognize the fair value of these awards on a graded vesting basis over the requisite service period of two to four years. PeRSUs granted during or after 2009 and the related RSUs (granted during or after 2010) have a single vest date and accordingly, we recognize expense on a straight-line basis over the requisite service period of four years. Compensation expense is recognized for the portion of the awards that is ultimately expected to vest. We develop an estimate of the number of share-based awards that will ultimately vest primarily based on historical experience. The estimated forfeiture rate established upon grant is re-assessed throughout the requisite service period. As required, the forfeiture estimates will be adjusted to reflect actual forfeitures when an award vests. The actual forfeitures in future reporting periods could be higher or lower than our current estimates. The compensation expense recognized has been classified in the condensed consolidated statements of operations or capitalized on the condensed consolidated balance sheets in the same manner as cash compensation paid to our employees. There was no material share-based compensation expense capitalized as part of the cost of an asset for the quarters and nine months ended December 31, 2009 and 2008. The components of share-based compensation expense and the related tax benefit for the quarters and nine months ended December31, 2009 and 2008 are shown in the following table: Quarter Ended Nine Months Ended December 31, |
Income Taxes
Income Taxes | |
9 Months Ended
Dec. 31, 2009 USD / shares | |
Income Taxes [Abstract] | |
Income Taxes | 5.Income Taxes The Companys reported income tax rates for the third quarters of 2010 and 2009 were 33.1% and 71.4% and 31.3% and 18.7% for the first nine months of 2010 and 2009. Fluctuations in our reported income tax rates are primarily due to discrete items as discussed below. During the third quarter and first nine months of 2010, income tax expense included net discrete items of an expense of $11million and a benefit of $4million. The expense in the third quarter of 2010 primarily consists of income taxes on the disposition of MLS and adjustments in connection with tax return filings. During the third quarter of 2009, we recorded a total income tax benefit of $50million, which included an income tax benefit of $182million related to the Average Wholesale Price (AWP) litigation charge described in more detail in Financial Note 12, Other Commitments and Contingent Liabilities. The tax benefit could change in the future depending on the resolution of the expected future claims. In addition, during the first nine months of 2009, income tax expense included $80million of net income tax benefits for discrete items primarily relating to previously unrecognized tax benefits and related accrued interest. The recognition of these discrete items was primarily due to the lapsing of the statutes of limitations. Of the $80million of net tax benefits, $65million represented a non-cash benefit to McKesson. In accordance with ASC 740, Income Taxes, the net tax benefit was included in our income tax expense from continuing operations. As of December31, 2009, we had $609million of unrecognized tax benefits, of which $368 million would reduce income tax expense and the effective tax rate if recognized. During the next twelve months, it is reasonably possible that audit resolutions and the expiration of statutes of limitations could potentially reduce our unrecognized tax benefits by up to $11million. However, this amount may change because we continue to have ongoing negotiations with various taxing authorities throughout the year. In Canada, we have received assessments from the Canada Revenue Agency (CRA) and some provinces for a total of $61million related to transfer pricing for 2003, 2004 and 2005. We paid the total assessments of $61million to the CRA to stop interest and penalty liabilities. We have appealed the assessment for 2003 and have filed a notice of objection for 2004 and 2005. We report interest and penalties on tax deficiencies as income tax expense. At December31, 2009, before any tax benefits, our accrued interest on unrecognized tax benefits amounted to $113 million. We recognized $4million and $13million of interest expense before any tax benefits in our condensed consolidated statements of operations during the quarter and nine months ended December31, 2009. We have no material amounts accrued for penalties. |
Earnings
Earnings (Loss) Per Share | |
9 Months Ended
Dec. 31, 2009 USD / shares | |
Earnings (Loss) Per Share [Abstract] | |
Earnings (Loss) Per Share | 6.Earnings (Loss) Per Share Basic earnings (loss)per share is computed by dividing net income (loss)by the weighted average number of common shares outstanding during the reporting period. Diluted earnings per share is computed similarly to basic earnings per share except that it reflects the potential dilution that could occur if dilutive securities or other obligations to issue common stock were exercised or converted into common stock. The computations for basic and diluted earnings (loss)per share are as follows: Quarter Ended Nine Months Ended December 31, December 31, (In millions, except per share data) 2009 2008 2009 2008 Net income (loss) $ 326 $ (20 ) $ 915 $ 542 Weighted average common shares outstanding: Basic 269 274 269 275 Effect of dilutive securities: Options to purchase common stock 3 3 3 Restricted stock units 2 1 1 Diluted 274 274 272 279 Earnings (Loss) Per Common Share: (1) Diluted $ 1.19 $ (0.07 ) $ 3.36 $ 1.94 Basic $ 1.21 $ (0.07 ) $ 3.41 $ 1.97 (1) Certain computations may reflect rounding adjustments. Approximately 2million stock options were excluded from the computations of diluted net earnings per share for the quarter ended December31, 2009 as their exercise price was higher than the Companys average stock price for the quarter. For the third quarter of 2009, potentially dilutive securities were excluded from the per share computations due to their antidilutive effect. For the nine months ended December31, 2009 and 2008, the number of stock options excluded was approximately 8million and 10million. |
Goodwill and Intangible Assets,
Goodwill and Intangible Assets, Net | |
9 Months Ended
Dec. 31, 2009 USD / shares | |
Goodwill and Intangible Assets, Net [Abstract] | |
Goodwill and Intangible Assets, Net | 7.Goodwill and Intangible Assets, Net Changes in the carrying amount of goodwill for the nine months ended December31, 2009 are as follows: Distribution Technology (In millions) Solutions Solutions Total Balance, March31, 2009 $ 1,869 $ 1,659 $ 3,528 Goodwill acquired 7 4 11 Acquisition accounting and other adjustments (29 ) (29 ) Foreign currency translation adjustments 19 30 49 Balance, December31, 2009 $ 1,866 $ 1,693 $ 3,559 Information regarding intangible assets is as follows: December 31, March 31, (In millions) 2009 2009 Customer lists $ 831 $ 824 Technology 190 187 Trademarks and other 73 70 Gross intangibles 1,094 1,081 Accumulated amortization (514 ) (420 ) Intangible assets, net $ 580 $ 661 Amortization expense of intangible assets was $31million and $90million for the quarter and nine months ended December31, 2009 and $32million and $96million for the quarter and nine months ended December31, 2008. The weighted average remaining amortization periods for customer lists, technology and trademarks and other intangible assets at December31, 2009 were 7years, 2years and 6years. Estimated annual amortization expense of these assets is as follows: $119million, $114million, $107million, $88million and $76million for 2010 through 2014, and $166million thereafter. All intangible assets were subject to amortization as of December31, 2009 and March 31, 2009. |
Financing Activities
Financing Activities | |
9 Months Ended
Dec. 31, 2009 USD / shares | |
Financing Activities [Abstract] | |
Financing Activities | 8.Financing Activities Accounts Receivable Sales Facility In May2009, we renewed our accounts receivable sales facility for an additional one year period under terms similar to those previously in place. The renewed facility will expire in May 2010. The May2009 renewal increased the committed balance from $1.0billion to $1.1billion, although from time-to-time the available amount may be less than $1.1billion based on concentration limits and receivable eligibility requirements. Through this facility, McKesson Corporation, the parent company, sells certain U.S. pharmaceutical trade accounts receivable on a non-recourse basis to a wholly-owned and consolidated subsidiary which then sells these receivables to a special purpose entity (SPE), which is a wholly-owned, bankruptcy-remote subsidiary of McKesson Corporation that is consolidated in our financial statements. This SPE then sells undivided interests in the receivables to third-party purchaser groups, each of which includes commercial paper conduits (Conduits), which are special purpose legal entities administered by financial institutions. Sales of undivided interests in the receivables by the SPE to the Conduits are accounted for as a sale because we have relinquished control of the receivables. Accordingly, accounts receivable sold under these transactions are excluded from receivables, net in the accompanying condensed consolidated balance sheets. Receivables sold and receivables retained by the Company are carried at face value, which due to the short-term nature of our accounts receivable and terms of the facility, approximates fair value. McKesson receives cash in the amount of the face value for the undivided interests in the receivables sold. No gain or loss is recorded upon sale as fee charges from the Conduits are based upon a floating yield rate and the period the undivided interests remain outstanding. Fee charges from the Conduits are accrued at the end of each month and are recorded within administrative expenses in the condensed consolidated statements of operations. Should we default under the accounts receivable sales facility, the Conduits are entitled to receive only collections on receivables owned by the SPE. We continue servicing the receivables sold. No servicing asset is recorded at the time of sale because we do not receive any servicing fees from third parties or other income related to servicing the receivables. We do not record any servicing liability at the time of sale as the receivables collection period is relatively short and the costs of servicing the receivables sold over the servicing period are insignificant. Servicing costs are recognized as incurred over the servicing period. Information regarding our outstanding balances related to our interests in accounts receivable sold or qualifying receivables retained is as follows: December 31, March 31, (In millions) 2009 2009 Receivables sold outstanding (1) $ $ Receivables retained, net of allowance for doubtful accounts $ 4,859 $ 4,814 (1) Deducted from receivables, net in the condensed consolidated balance she |
Pension and Other Postretiremen
Pension and Other Postretirement Benefit Plans | |
9 Months Ended
Dec. 31, 2009 USD / shares | |
Pension and Other Postretirement Benefit Plans [Abstract] | |
Pension and Other Postretirement Benefit Plans | 9.Pension and Other Postretirement Benefit Plans Net periodic expense for the Companys defined pension and other postretirement benefit plans was $7million and $19million for the third quarter and first nine months of 2010 compared to $2 million and $7million for the comparable prior year periods. Cash contributions to these plans for the first nine months of 2010 were $24million. As previously reported in our 2009 Annual Report and our Quarterly Reports on Form 10-Q for the quarterly periods ended June30, 2009 (First Quarter 2010 Form 10-Q) and September30, 2009 (Second Quarter 2010 Form 10-Q), the McKesson Corporation Profit Sharing Investment Plan (PSIP) is a member of the settlement class in the Consolidated Securities Litigation Action. On April27, 2009, the court issued an order approving the distribution of the settlement funds. On October9, 2009, the PSIP received approximately $119million of the Consolidated Securities Litigation Action proceeds. Approximately $42million of the proceeds are attributable to the allocated shares of McKesson common stock owned by the PSIP participants during the Consolidated Securities Litigation Action class holding period and were allocated to the respective participants on that basis in the third quarter of 2010. Approximately $77million of the proceeds are attributable to the unallocated shares (the Unallocated Proceeds) of McKesson common stock owned by the PSIP in an employee stock ownership plan (ESOP) suspense account. In accordance with the plan terms, the PSIP will distribute all of the Unallocated Proceeds to current PSIP participants as soon as administratively feasible after the close of the plan year. The receipt of the Unallocated Proceeds by the PSIP is reimbursement for the loss in value of the Companys common stock held by the PSIP in its ESOP suspense account during the Consolidated Securities Litigation Action class holding period and is not a contribution made by the Company to the PSIP or ESOP. Accordingly, there are no accounting consequences to the Companys financial statements relating to the receipt of the Unallocated Proceeds by the PSIP. The Company accounts for shares of its common stock contributed to the ESOP prior to 1993 in accordance with the American Institute of Certified Public Accountants Statement of Position (SOP) 76-3, Accounting Practices for Certain Employee Stock Ownership Plans. SOP 76-3 requires that compensation expense be recognized only to the extent that the Company contributes or commits to contribute to the ESOP. The Company accounts for all contributions of shares of its common stock made to the ESOP after 1993 under ASC 718-40, Compensation Stock Compensation: Employee Stock Ownership Plans. During the first quarter of 2010, the Company contributed $1million to the ESOP in order to extinguish the remaining ESOP loan and made no commitments to otherwise contribute to the PSIP or ESOP. Upon repayment, our ESOP became a non-leveraged ESOP. At December 31, 2009, of the 24million shares of the Companys common stock purchased by the ESOP since its inception, all but 66,444 shares have been allocated to PSIP participants. As a result of |
Financial Guarantees and Warran
Financial Guarantees and Warranties | |
9 Months Ended
Dec. 31, 2009 USD / shares | |
Financial Guarantees and Warranties [Abstract] | |
Financial Guarantees and Warranties | 10.Financial Guarantees and Warranties Financial Guarantees We have agreements with certain of our customers financial institutions under which we have guaranteed the repurchase of inventory (primarily for our Canadian business) at a discount in the event these customers are unable to meet certain obligations to those financial institutions. Among other requirements, these inventories must be in resalable condition. The inventory repurchase agreements mostly range from one to two years. Customer guarantees range from one to five years and were primarily provided to facilitate financing for certain customers. The majority of our other customer guarantees are secured by certain assets of the customer. We also have an agreement with one software customer that, under limited circumstances, may require us to secure standby financing. Because the amount of the standby financing is not explicitly stated, the overall amount of these guarantees cannot reasonably be estimated. At December31, 2009, the maximum amounts of inventory repurchase guarantees and other customer guarantees were $117million and $14million none of which has been accrued. Our software license agreements generally include certain provisions for indemnifying customers against liabilities if our software products infringe a third partys intellectual property rights. To date, we have not incurred any material costs as a result of such indemnification agreements and have not accrued any liabilities related to such obligations. In conjunction with certain transactions, primarily divestitures, we may provide routine indemnification agreements (such as retention of previously existing environmental, tax and employee liabilities) whose terms vary in duration and often are not explicitly defined. Where appropriate, obligations for such indemnifications are recorded as liabilities. Because the amounts of these indemnification obligations often are not explicitly stated, the overall maximum amount of these commitments cannot be reasonably estimated. Other than obligations recorded as liabilities at the time of divestiture, we have historically not made significant payments as a result of these indemnification provisions. Warranties In the normal course of business, we provide certain warranties and indemnification protection for our products and services. For example, we provide warranties that the pharmaceutical and medical-surgical products we distribute are in compliance with the Food, Drug and Cosmetic Act and other applicable laws and regulations. We have received the same warranties from our suppliers, which customarily are the manufacturers of the products. In addition, we have indemnity obligations to our customers for these products, which have also been provided to us from our suppliers, either through express agreement or by operation of law. We also provide warranties regarding the performance of software and automation products we sell. Our liability under these warranties is to bring the product into compliance with previously agreed upon specifications. For software products, this may result in additional project costs, which are reflected in our |
Financial Instruments
Financial Instruments | |
9 Months Ended
Dec. 31, 2009 USD / shares | |
Financial Instruments [Abstract] | |
Financial Instruments | 11.Financial Instruments At December31, 2009 and March31, 2009, the carrying amounts of cash and cash equivalents, restricted cash, marketable securities, receivables, drafts and accounts payable and other current liabilities approximated their estimated fair values because of the short maturity of these financial instruments. All highly liquid debt instruments purchased with a maturity of three months or less at the date of acquisition are included in cash and cash equivalents. Included in cash and cash equivalents at December31, 2009 and March31, 2009 are money market fund investments of $2.1billion and $1.7billion which are reported at fair value. The fair value of these investments was determined by using quoted prices for identical investments in active markets which are considered to be Level 1 inputs under ASC 820, Fair Value Measurements and Disclosures. The carrying amounts and estimated fair values of our long-term debt and other financing were $2,511million and $2,731million at December31, 2009 and $2,509million and $2,545million at March31, 2009. The estimated fair value of our long-term debt and other financing was determined using quoted market prices and other inputs that were derived from available market information and may not be representative of actual values that could have been or will be realized in the future. |
Other Commitments and Contingen
Other Commitments and Contingent Liabilities | |
9 Months Ended
Dec. 31, 2009 USD / shares | |
Other Commitments and Contingent Liabilities [Abstract] | |
Other Commitments and Contingent Liabilities | 12.Other Commitments and Contingent Liabilities In addition to commitments and obligations in the ordinary course of business, we are subject to various claims, other pending and potential legal actions for damages, investigations relating to governmental laws and regulations and other matters arising out of the normal conduct of our business. In accordance with ASC 450, Contingencies, we record a provision for a liability when management believes that it is both probable that a liability has been incurred and the amount of the loss can be reasonably estimated. We believe we have adequate provisions for any such matters. Management reviews these provisions at least quarterly and adjusts these provisions to reflect the impact of negotiations, settlements, rulings, advice of legal counsel and other information and events pertaining to a particular case. Because litigation outcomes are inherently unpredictable, these decisions often involve a series of complex assessments by management about future events that can rely heavily on estimates and assumptions and it is possible that the ultimate cost of these matters could impact our earnings, either negatively or positively, in the quarter of their resolution. Based on our experience, we believe that any damage amounts claimed in the specific matters referenced in our 2009 Annual Report, First and Second Quarter 2010 Form 10-Q filings and those matters discussed below are not meaningful indicators of our potential liability. We believe that we have valid defenses to these legal proceedings and are defending the matters vigorously. Nevertheless, the outcome of any litigation is inherently uncertain. We are currently unable to estimate the remaining possible losses in these unresolved legal proceedings. Should any one or a combination of more than one of these proceedings against us be successful, or should we determine to settle any or a combination of these matters on unfavorable terms, we may be required to pay substantial sums, become subject to the entry of an injunction, or be forced to change the manner in which we operate our business, which could have a material adverse impact on our financial position or results of operations. As more fully described in our previous public reports filed with the SEC, we are involved in numerous legal proceedings. For a discussion of these proceedings, please refer to the Financial Notes entitled Other Commitments and Contingent Liabilities included in our 2009 Annual Report and in our First and Second Quarter 2010 Form 10-Q filings. Significant developments in previously reported proceedings and in other litigation and claims since the referenced filings are set out below. As previously reported, on July14, 2009, the Georgia Court of Appeals issued its opinion on our appeals in the last two remaining lawsuits filed against the Company arising out of our January 12, 1999 acquisition of HBO Company, Holcombe T. Green and HTG Corp. v. McKesson Corporation, et al. (Georgia State Court, Fulton County, Case No.06-VS-096767-D) and Hall Family Investments, L.P. v. McKesson Corporation, et al. (Georgia State Court, Fulton County, Case No.06-VS-0967 |
Stockholders Equity
Stockholders Equity | |
4/1/2009 - 12/31/2009
USD / shares | |
Stockholders' Equity [Abstract] | |
Stockholders' Equity | 13.Stockholders Equity Comprehensive income (loss)is as follows: Quarter Ended Nine Months Ended December 31, December 31, (In millions) 2009 2008 2009 2008 Net income (loss) $ 326 $ (20 ) $ 915 $ 542 Foreign currency translation adjustments and other 20 (166 ) 202 (215 ) Comprehensive income (loss) $ 346 $ (186 ) $ 1,117 $ 327 Foreign currency translation adjustments and other are primarily the result of the impact of favorable and unfavorable foreign currency exchange rates on foreign subsidiaries. Stock Repurchase Activities In April2008, the Companys Board of Directors (the Board) approved a plan to repurchase $1.0billion of the Companys common stock, of which $830million remained available at March31, 2009. During the third quarter of 2010, we did not repurchase shares. During the first nine months of 2010, we repurchased 8million shares for $299million, leaving $531million available for future repurchases as of December31, 2009. Stock repurchases may be made from time-to-time in open market or private transactions. In July2008, the Board authorized the retirement of shares of the Companys common stock that may be repurchased from time-to-time pursuant to its stock repurchase program. During the second quarter of 2009, all of the 4million repurchased shares, which we purchased for $204million, were formally retired by the Company. The retired shares constitute authorized but unissued shares. We elected to allocate any excess of share repurchase price over par value between additional paid-in capital and retained earnings. As such, $165million was recorded as a decrease to retained earnings. |
Segment Information
Segment Information | |
9 Months Ended
Dec. 31, 2009 USD / shares | |
Segment Information [Abstract] | |
Segment Information | 14.Segment Information We report our operations in two operating segments: McKesson Distribution Solutions and McKesson Technology Solutions. The factors for determining the reportable segments included the manner in which management evaluates the performance of the Company combined with the nature of the individual business activities. We evaluate the performance of our operating segments based on operating profit (loss)before interest expense, income taxes and results from discontinued operations. Financial information relating to our reportable operating segments and reconciliations to the condensed consolidated totals is as follows: Quarter Ended Nine Months Ended December 31, December 31, (In millions) 2009 2008 2009 2008 Revenues Distribution Solutions (1) Direct distribution services $ 18,992 $ 17,037 $ 53,880 $ 50,076 Sales to customers warehouses 5,330 6,695 16,882 19,678 Total U.S. pharmaceutical distribution services 24,322 23,732 70,762 69,754 Canada pharmaceutical distribution services 2,421 1,967 6,816 6,390 Medical-Surgical distribution services 758 680 2,177 2,007 Total Distribution Solutions 27,501 26,379 79,755 78,151 Technology Solutions Services 610 576 1,812 1,722 Software software systems 138 141 410 419 Hardware 23 34 82 116 Total Technology Solutions 771 751 2,304 2,257 Total $ 28,272 $ 27,130 $ 82,059 $ 80,408 Operating Profit (Loss) (2) Distribution Solutions (3) (4) $ 558 $ (54 ) $ 1,403 $ 736 Technology Solutions 81 91 300 228 Total 639 37 1,703 964 Corporate (105 ) (74 ) (249 ) (195 ) Litigation Credit 20 Interest Expense (47 ) (33 ) (142 ) (102 ) Income (Loss) Before Income Taxes $ 487 $ (70 ) $ 1,332 $ 667 (1) Revenues derived from services represent less than 1% of this segments total revenues for the quarters and nine months ended December31, 2009 and 2008. (2) Operating profit (loss)includes net earnings of $3 and $8million from equity investments for the third quarter and first nine months of 2010 and net earnings of $5million and $10 million for the comparable prior year periods which were primarily recorded within our Distribution Solutions segment. (3) Operating profit for the third quarter and first nine months of 2010 includes a $17million pre-tax gain on the sale of our 50% equity interest in MLS and for the first nine months of 2009 includes a $24million pre-tax gain on the sale of our 42% equity interest in Verispan. (4) Operating profit (loss)for the third quarter and first nine months of 2009 for our Distribution Solu |