SEC Comment Letter for MCKESSON CORP (MCK) (CIK 0000927653) (MCK) — Oct 7, 2005
MCKESSON CORP (MCK) (CIK 0000927653)
Date: Oct. 7, 2005 · CIK: 0000927653 · Accession: 0000000000-05-051695
AI Filing Summary & Sentiment
Letter
Mail Stop 6010 Via Facsimile and U.S. Mail October 7, 2005 Mr. Jeffrey C Campbell Chief Financial Officer McKesson Corporation McKesson Plaza One Post Street San Francisco, CA 94104
Re: McKesson Corporation Form 10-K for March 31, 2005 File No. 1-13252
Dear Mr. Campbell:
We have limited our review of your fili ngs to those issues addressed in our comments. In our comments, we ask you to provide us with information so we may better understand your disclosure. After re viewing this information, we may raise additional comments.
Please understand that the purpose of our re view process is to assist you in your compliance with the applicable disclosure requirements and to enhance the overall disclosure in your filing. We look forward to working with you in these respects. We welcome any questions you may have about our comments or any other aspect of our review. Feel free to call us at the telephone numbers listed at the end of this letter.
Form 10-K for March 31, 2005
Management’s Discussion and Analysis 1. You discuss the business model transition in your pharmaceutical distribution business to fee-based a rrangements, yet we do not see any disclosure of: • The different nature of these arra ngements including their terms and how you are compensated; • The effects/expected effects on histor ical/future operations, cash flows and financial position of these arrangement s, both quantitative and qualitative; or
Mr. Jeffrey C Ca mpbell McKesson Corporation October 7, 2005 Page 2
• Your accou nting policies for record ing and class ifying in yo ur financia l statem ents amounts received and costs incurred under these new arrang ements.
Please provide us the above inform ation in disclosure-type form at. 2. You identify critical accounting polic ies requiring significant estim ates such as supplier reserves and m erchandi se inventories. W e believe that the focus of this disclosure should be on the estim ate identified as critical rather than p olicies. For each critic al accounting estim ate, please provide us in disclosure-type form at manage ment’s analysis of how the estim ate has affected your resu lts of operatio ns for each period presented, and how the variability that is reasonably like ly to result from application of each critical accounting estim ates may affect your future operations. Refer to Release 33-8350. 3. Please prov ide us a rev ised contract ual obligation table that in cludes interest on d ebt becau se we believe that interest is part of that contractual obligation.
Financial Statem ents 4. You include in revenues sales of prod ucts for shipm ents from the supplier directly to custom ers’ warehouses. Ab sent any other clar ifying disclosure, these disclosures could be construed to mean that you are an agent rather than a principal in thes e transactions. In order to help us understand whether you are a p rincipal or an ag ent, describe for us the form of these transactions and the right s and obligations of the parties involved. Also, provide us a thorough analysis of how your presentation of the gross amount of these product sales as reve nues com plies with EIT F 99-19. In your response, explicitly analyze each of the EITF 99-19 indicators for gross reporting and explain to us why you believe the weight of these indicators dictate gross reporting. As part of, but not in place of, your analysis of the prim ary obligor indicator, tell us (A) whether your custom ers have ever loo ked to the supplier for th e accep tability of the products purchased, including, but no t limited to, the quantity, quality, and/or return rights of purchased products, and (B) if not, what causes them to look to you for fulfillm ent in light of the fact that they appear to have som e level of direct interacti on with the sup plier, who is also th e manufacturer of the produc ts they purchased. If the indicators in EITF 99- 19 dictate gross reporting, please propos e revised disclosu re that will clearly and concisely convey to inve stors why sales of products in which
Mr. Jeffrey C Ca mpbell McKesson Corporation October 7, 2005 Page 3
you act as an interm ediary and shipm ents from the supplier directly to the custom ers’ warehouse are recorded on a gross basis. 5. Explain to us why you do not present a ny disclosure required by paragraph 37 of FAS 131 for your Pharm aceutical Solu tions segm ent. * * * *
Please respond to these comm ents within 10 business days or tell us when you will prov ide us with a res ponse. Your letter shou ld key your responses to our comm ents. Detailed letters greatly facil itate our review. Please file your letter on E DGAR under the form type label CORRESP.
We urge all persons who are responsible for the accuracy and adequacy of the disclosu re in the f iling to be cer tain that the filing include s all in form ation required under the Securities Exchange Act of 1934 and th at they have provided all inform ation investors require for an inform ed invest ment decision. Since the com pany and its manage ment are in possession of all f acts re lating to a com pany’s disclosure, they are responsib le for the accu racy and adequacy of the disclosu res they have m ade.
In connection with responding to our co mments, please provide, in your letter, a statem ent fr om the company ackno wledging th at:
• the com pany is respon sible for the adequacy and accuracy of the dis closure in the filings; • staff comm ents or chang es to dis closure in response to staff comm ents do not foreclose the Comm ission from taking a ny actio n with respe ct to the f iling; and • the com pany m ay not assert staff comme nts as a defense in any proceeding initiated by the Comm ission or any pers on under the federal s ecurities law s of the United S tates.
In addition, please be advi sed that the Division of En force ment has access to all inform ation you provide to the staff of the Divi sion of Corporation Fi nance in our review of your filin g or in respo nse to our comm ents on your filing.
You m ay contact L isa Vanjoske, Assist ant Chief Accountant, at 202-551-3614 if you have questions regarding the comments. In this regard, do not hesitate to contact m e, at (202) 551-3679.
S incerely,
Jim B. Rosenberg Senior Assistant Chief Accountant
Show Raw Text
Mail Stop 6010
Via Facsimile and U.S. Mail
October 7, 2005
Mr. Jeffrey C Campbell
Chief Financial Officer
McKesson Corporation
McKesson Plaza
One Post Street
San Francisco, CA 94104
Re: McKesson Corporation
Form 10-K for March 31, 2005
File No. 1-13252
Dear Mr. Campbell:
We have limited our review of your fili ngs to those issues addressed in our
comments. In our comments, we ask you to provide us with information so we may
better understand your disclosure. After re viewing this information, we may raise
additional comments.
Please understand that the purpose of our re view process is to assist you in your
compliance with the applicable disclosure requirements and to enhance the overall
disclosure in your filing. We look forward to working with you in these respects. We
welcome any questions you may have about our comments or any other aspect of our
review. Feel free to call us at the telephone numbers listed at the end of this letter.
Form 10-K for March 31, 2005
Management’s Discussion and Analysis
1. You discuss the business model transition in your pharmaceutical
distribution business to fee-based a rrangements, yet we do not see any
disclosure of:
• The different nature of these arra ngements including their terms and how
you are compensated;
• The effects/expected effects on histor ical/future operations, cash flows and
financial position of these arrangement s, both quantitative and qualitative;
or
Mr. Jeffrey C Ca mpbell
McKesson Corporation
October 7, 2005
Page 2
• Your accou nting policies for record ing and class ifying in yo ur financia l
statem ents amounts received and costs incurred under these new
arrang ements.
Please provide us the above inform ation in disclosure-type form at.
2. You identify critical accounting polic ies requiring significant estim ates
such as supplier reserves and m erchandi se inventories. W e believe that the
focus of this disclosure should be on the estim ate identified as critical
rather than p olicies. For each critic al accounting estim ate, please provide
us in disclosure-type form at manage ment’s analysis of how the estim ate
has affected your resu lts of operatio ns for each period presented, and how
the variability that is reasonably like ly to result from application of each
critical accounting estim ates may affect your future operations. Refer to
Release 33-8350.
3. Please prov ide us a rev ised contract ual obligation table that in cludes
interest on d ebt becau se we believe that interest is part of that contractual
obligation.
Financial Statem ents
4. You include in revenues sales of prod ucts for shipm ents from the supplier
directly to custom ers’ warehouses. Ab sent any other clar ifying disclosure,
these disclosures could be construed to mean that you are an agent rather
than a principal in thes e transactions. In order to help us understand
whether you are a p rincipal or an ag ent, describe for us the form of these
transactions and the right s and obligations of the parties involved. Also,
provide us a thorough analysis of how your presentation of the gross
amount of these product sales as reve nues com plies with EIT F 99-19. In
your response, explicitly analyze each of the EITF 99-19 indicators for
gross reporting and explain to us why you believe the weight of these
indicators dictate gross reporting. As part of, but not in place of, your
analysis of the prim ary obligor indicator, tell us (A) whether your
custom ers have ever loo ked to the supplier for th e accep tability of the
products purchased, including, but no t limited to, the quantity, quality,
and/or return rights of purchased products, and (B) if not, what causes
them to look to you for fulfillm ent in light of the fact that they appear to
have som e level of direct interacti on with the sup plier, who is also th e
manufacturer of the produc ts they purchased. If the indicators in EITF 99-
19 dictate gross reporting, please propos e revised disclosu re that will
clearly and concisely convey to inve stors why sales of products in which
Mr. Jeffrey C Ca mpbell
McKesson Corporation
October 7, 2005
Page 3
you act as an interm ediary and shipm ents from the supplier directly to the
custom ers’ warehouse are recorded on a gross basis.
5. Explain to us why you do not present a ny disclosure required by paragraph
37 of FAS 131 for your Pharm aceutical Solu tions segm ent.
* * * *
Please respond to these comm ents within 10 business days or tell us when you
will prov ide us with a res ponse. Your letter shou ld key your responses to our comm ents.
Detailed letters greatly facil itate our review. Please file your letter on E DGAR under the
form type label CORRESP.
We urge all persons who are responsible for the accuracy and adequacy of the
disclosu re in the f iling to be cer tain that the filing include s all in form ation required under
the Securities Exchange Act of 1934 and th at they have provided all inform ation
investors require for an inform ed invest ment decision. Since the com pany and its
manage ment are in possession of all f acts re lating to a com pany’s disclosure, they are
responsib le for the accu racy and adequacy of the disclosu res they have m ade.
In connection with responding to our co mments, please provide, in your letter, a
statem ent fr om the company ackno wledging th at:
• the com pany is respon sible for the adequacy and accuracy of the dis closure in
the filings;
• staff comm ents or chang es to dis closure in response to staff comm ents do not
foreclose the Comm ission from taking a ny actio n with respe ct to the f iling;
and
• the com pany m ay not assert staff comme nts as a defense in any proceeding
initiated by the Comm ission or any pers on under the federal s ecurities law s of
the United S tates.
In addition, please be advi sed that the Division of En force ment has access to all
inform ation you provide to the staff of the Divi sion of Corporation Fi nance in our review
of your filin g or in respo nse to our comm ents on your filing.
You m ay contact L isa Vanjoske, Assist ant Chief Accountant, at 202-551-3614 if
you have questions regarding the comments. In this regard, do not hesitate to contact m e,
at (202) 551-3679.
S incerely,
Jim B. Rosenberg
Senior Assistant Chief Accountant