McKesson 2006 Annual Report Download - page 70

Download and view the complete annual report

Please find page 70 of the 2006 McKesson annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 115

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98
  • 99
  • 100
  • 101
  • 102
  • 103
  • 104
  • 105
  • 106
  • 107
  • 108
  • 109
  • 110
  • 111
  • 112
  • 113
  • 114
  • 115

McKESSON CORPORATION
FINANCIAL NOTES (Continued)
During the last three years we also completed a number of other acquisitions and investments within all three of our operating segments.
Purchase prices have been allocated based on estimated fair values at the date of acquisition and, for certain recent acquisitions, may be subject
to change. 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 aggregate basis.
In 2006, we sold our wholly-owned subsidiary, McKesson BioServices Corporation (“BioServices”), for net proceeds of $63 million. The
divestiture resulted in an after-tax gain of $13 million or $0.04 per diluted share. The results of BioServices’ operations have been presented as
a discontinued operation for all periods presented in the accompanying consolidated financial statements. Financial results for this business
were previously included in our Pharmaceutical Solutions segment and were not material to our consolidated financial statements.
In 2005, our Medical-Surgical Solutions segment entered into an agreement with a third party vendor to sell the vendor’s proprietary
software and services. The terms of the contract required us to prepay certain royalties. During the third quarter of 2006, we ended marketing
and sale of the software under the contract. As a result of this decision, we recorded a $15 million charge to cost of sales within our Medical-
Surgical Solutions segment in the third quarter of 2006 to write-off the remaining balance of the prepaid royalties.
65
−
Also in the second quarter of 2006, we acquired all of the issued and outstanding shares of Medcon, Ltd. (“Medcon”), an Israeli company,
for an aggregate purchase price of $82 million. Medcon provides web-based cardiac image and information management services to
healthcare providers. Approximately $66 million of the purchase price was assigned to goodwill, none of which is deductible for tax
purposes and $20 million was assigned to intangibles which represent technology assets and customer lists which have an estimated
weighted-average useful life of four years. The results of Medcon’s operations have been included in the consolidated financial statements
within our Provider Technologies segment since the acquisition date.
−
In the third quarter of 2005, we invested $33 million in return for a 79.7% interest in Pahema, S.A. de C.V. (“Pahema”), a Mexican holding
company. Two additional investors, owners of approximately 30% of the outstanding shares of Nadro S.A. de C.V. (“Nadro”) (collectively,
“investors”), contributed $10 million for the remaining interest in Pahema. In December 2004, Pahema completed a 6.50 Mexican Pesos per
share, or approximately $164 million, tender offer for approximately 284 million shares (or approximately 46%) of the outstanding publicly
held shares of the common stock of Nadro. Pahema financed the tender offer utilizing the cash contributed by the investors and us, and
borrowings totaling 1.375 billion Mexican Pesos, in the form of two notes with Mexican financial institutions. Prior to the tender offer, the
Company owned approximately 22% of the outstanding common shares of Nadro. During the first half of 2006, we merged Pahema into
Nadro and the common stock of Pahema was exchanged for the common stock of Nadro. After the completion of the merger, we own
approximately 48% of Nadro.
− In the first quarter of 2005, we acquired all of the issued and outstanding shares of Moore Medical Corp. (“MMC”), of New Britain,
Connecticut, for an aggregate cash purchase price of $37 million. MMC is an Internet-enabled, multi-channel marketer and distributor of
medical-surgical and pharmaceutical products to non-hospital provider settings. Approximately $19 million of the purchase price was
assigned to goodwill, none of which was deductible for tax purposes. The results of MMC’s operations have been included in the
consolidated financial statements within our Medical-Surgical Solutions segment since the acquisition date.
3. Discontinued O
p
eration
4. Contract